What is a Treasury Bond?

A treasury bond is an interest-bearing debt security that is issued by the United States government. It has the following characteristics:

Maturity. A treasury bond matures over a period of more than 20 years.
Interest rate. The interest rate associated with a treasury bond is fixed.
Interest payments. Interest payments are made to investors at six-month intervals.
Purchase method. Treasury bonds may be purchased at auction from the government, or from a bank or broker.
Taxation. The interest earned on treasury bonds is taxed at the federal level, but is exempt from taxation at the state and local levels.

Treasury Bond Risk

Since treasury bonds are issued by the United States government, which can raise taxes to ensure that its bonds are paid, treasury bonds are assumed to be risk-free. For this reason, many investors that want to minimize risk are willing to purchase them.