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 investors. The 30 year Treasury bond is the longest maturity of these investment options. When they mature, the Treasury can either pay the cash owed plus interest or issue new securities.
Major foreign holders of US treasuries are detailed in the following graph:
The key characteristics of a bond from either a government or corporation are:
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 shorterterm.
This is usually ascribed to the perception of higher risk or rising rates for longer term investments. 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.
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