How Do Treasury Bonds Work?

Thomas-Brock-13- How do treasury bonds work_

Thomas Brock explains that Treasury bills, notes, and bonds involve lending money to the U.S. government, which pays interest over time and returns the principal, with bills sold at a discount and notes or bonds providing regular interest payments.
Video Transcript

With a Treasury bill, note, or bond, you are loaning money to the US government.

And, the government has agreed to pay you interest over time, and return that principal at some future date. With bills, the shortest of the three treasuries, they're usually issued zero discount.

This means, the price that you pay is at a discount to the ultimate amount you'll receive later.

Now, with notes and bonds, it's a little different. Typically, they pay you interest at regular intervals, usually every six months. So, with a treasury bond issued at a five percent coupon for a thousand dollar par value, you will receive twenty five dollars every six months, which totals fifty bucks in a year.