ActualPrevious
Total Amount$13 B$13 B
Coupon Rate4.750%4.750%
Bid/Cover2.532.55
Yield Awarded4.423%4.213%
CUSIP Number912810TW8912810TW8
Originally Announced CUSIP912810TW8912810TW8

Definition

Treasury bonds are sold at regularly scheduled public auctions. The competitive bids at these auctions determine the interest rate paid on each Treasury bond issue. A group of securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the bonds, resell the bonds to their clients or trade them with other securities firms. Typically, the New York Fed approves about 20 securities firms to be primary dealers regularly and the latest list can be found here. The Treasury will announce the amount, date and time of each 20-year auction in the week prior to the auction, which will regularly be held in the third week of each month and settled on the last day of the month or the first business day thereafter. Retired in 1986, the 20-year bond was re-introduced in May 2020 to provide another long-maturing offering that would extend the duration of outstanding debt and help fund a ballooning Federal deficit.

Description

Individual investors can participate in Treasury auctions either through a securities dealer (brokerage firm) or via the Treasury Direct program, which saves on brokerage commissions. But brokers commissions are often nominal (especially with discount brokers), and using a broker does eliminate a lot of paper work and other administrative hassles. Brokers facilitate the purchases and sales of Treasuries in the secondary market, which is handy for buying Treasuries at times other than scheduled auctions or for maturities other than those offered by standard new issues.
Interest rates on Treasury securities are determined in the market; the Federal Reserve does not set them. However, bond investors are sensitive to Federal Reserve policy and thus market rates will mirror policy expectations. Usually, bond market players are forward-looking and this means that interest rates on Treasury securities will move in the direction of Fed policy with a lead. As a result, one is more likely to see rising interest rates on Treasury yields during an expansion (and falling yields during economic slowdowns) in advance of policy changes by the Federal Reserve.
Primer on Treasuries
Treasury securities, Treasuries, U.S. government bonds, T-bonds, T-notes, and T-bills all refer to the same type of security: debt obligations of the United States. Maturity refers to the length of the loan to the government. Treasury notes have maturities from 2 to 10 years (2-, 3-, 5-, 7- and 10-year notes are most common) while Treasury bonds have maturities longer than 10 years (commonly 30-year, and 20-year since May 2020). Since 2008, the Treasury ruled that all securities it issues now have minimum denominations of $100 and must be purchased in increments of $100.

How bonds work
You pay $1,000 for a bond. You receive interest payments every six months based on the coupon rate. If the rate is 6%, you get $30 every six months for a total of $60/year. When the bond matures in twenty years, you get back the original investment of $1,000, called the principal.

Investment Profile
Treasuries offer a measure of security unmatched by other investments - the U.S. government guarantees the initial investment (the principal) and interest payments. When Treasuries are resold in the secondary market, their prices are often significantly different than their face value since prices in the secondary market fluctuate based on the economic environment, inflation expectations, Federal Reserve policy, and simple forces of supply and demand. If a Treasury security is held to maturity, inflation and opportunity risks remain. Inflation erodes the value of both the principal and interest payments. Opportunity risk refers to what could have been earned had the money been invested elsewhere.

Frequency
Varies according to funding needs
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