- The "long" Treasury bond is issued with a maturity of 30 years. The longest-term Treasury note has a 10-year maturity. Treasury bonds can be purchased in the secondary market at any maturity; the long end of Treasuries is bonds maturing in 10 to 30 years. Long Treasury bonds will pay a fixed rate of interest until they mature and the face amount is paid to the investor.
- In most interest rate environments, longer-maturity bonds will pay a higher rate of interest than short-maturity bonds. This relationship between maturity and yield is called the yield curve, and increasing rates for longer maturities is a normal or positive slope yield curve. For example, in February 2011, the five-year Treasury yielded 2.0 percent, the 10-year note 3.36 percent and the 30-year bond was at 4.4 percent. Investors looking for higher yields can find it by selecting longer-term Treasury bonds.
- Long term Treasuries pay a fixed rate of interest. If rates change, the bond market adjusts by increasing or lowering the market price of bonds. Falling rates cause bond prices to increase and rising rates will result in lower bond prices. Longer-term bonds have greater price changes than shorter-term bonds. The biggest risk to long Treasury investing is rising interest rates. An investor would be forced to either sell bonds at a lower price or hold a bond for many years, earning a below-market interest rate.
- Select long-term Treasuries for your portfolio if you understand the interest rate risk, want to lock in current rates and the bonds fit with your investment goals. One solution to building a portfolio of Treasuries is to buy Treasury bonds with laddered maturities. With laddered maturities, some bonds will mature every few years and the proceeds can be invested at current interest rates. New bond purchases will always be at the longest maturity with the highest rates.
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