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30-year Treasury bond (US-057)

Treasury Yield 30 Years

This market is based on the longest maturity bond issued by the US Treasury. It is often viewed as a way to speculate in or hedge against future interest rate changes and is valued globally as a market to use when trying to manage risk of the same. From their debut in the 1970s on the CBOT, Treasury bond futures have become a popular and liquid market.

The United States Treasury has been responsible for federal finances for over two hundred years. The means through which it takes on debt are securities sold both domestically and to foreign traders. The 30 year Treasury bond is the longest maturity of these trades options. When they mature, the Treasury can either pay the cash owed plus interest or issue new securities. 

The key characteristics of a bond from either a government or corporation are:

  • The face value
  • The coupon rate
  • Maturity
  • The issuer

In the case of T-Bonds, the face value is $100,000, the maturity is 30 years, and the issuer is the US Treasury. The coupon rate is the fixed interest rate for the payments which will be paid to the buyer of the bond and is set when issued. 

The price of the bond is not necessarily the same as the face value. Usually, the price may vary throughout the life of the bond. When the price is higher than face value, the bond is selling at a premium and when it is lower, it is termed as selling at a discount.

Normally, bond price is inversely related to interest rates. If interest rates go up, the price of bonds normally falls and vice versa. This notion is due to the relationship of the bond’s interest rate as compared to the prevailing interest rates. 

When discussing T-Bonds, the term "yield" comes into focus regularly. When the bond is purchased at par, the yield is equal to the interest rate. Usually, if the price of the bond goes down, the yield goes up while a higher price reduces yield. 

Yield curves may also be important to note and are often cited in analysis of economic conditions. These are constructed from the yields for various maturities placed on a graph. A "normal" yield curve is one in which longer-term yields are higher than shorter-term. This is usually ascribed to the perception of higher risk or rising rates for longer term trades. An "inverted" yield curve has the opposite structure, with shorter-term yields higher than longer-term. This may often be associated with falling or anticipated fall in interest rates. Flat yield curves may also be present if a forecast of little difference exists between the yield rates for different maturities.

It is important to note that the futures contract delivery date is not associated with the maturity date of the bond and normally the deliverable bonds will have at least 15 years before maturity.

The 30-year Treasury Bond is a debt obligation issued by the US Treasury and backed by the full faith of the US government. The 30-year Treasury Bond has a 30 year maturity. The 30-year Treasury Bond generally pays higher interest rates than shorter-term Treasury notes due to greater risk associated with the longer maturity. However, the 30-year Treasury Bond, like other US government securities, is considered a relatively risk-free trade. At one time, the 30-year Treasury Bond was considered the benchmark US bond but the 30-year treasury bond has since been replaced by the 10-year bond in most portfolios. The Treasury stopped issuing the 30-year Treasury bond in 2001 but recently announced its intent to hold a 30-year Treasury Bond auction in early 2006.

It is important to note that the futures contract delivery date is not associated with the maturity date of the bond and normally the deliverable bonds will have at least 15 years before maturity.