Bonds
Bonds are lower-risk and lower-return investments than stocks, which makes them an essential component of a balanced investment portfolio, especially for older or more conservative investors.
Introduction to Bonds
-
Treasury bonds, notes, and bills are all fixed-income securities issued by the U.S. Treasury. The primary difference between them is their maturity dates and the frequency of interest payments. Treasury bills have the shortest maturities, ranging from four weeks to one year, and they only pay interest when they mature. Treasury notes are issued with maturities ranging from two to 10 years, and pay interest every six months. And Treasury bonds mature in either 20 or 30 years, also paying interest every six months.
-
An inverted yield curve is widely considered one of the most reliable indicators of an impending recession. An inverted yield curve has preceded every U.S. recession since 1955 with only one false alarm. Though the inverted yield curve observed in 2019, which preceded the short recession triggered by the COVID-19 pandemic, should hardly be interpreted as a predictor of that recession.
Learn More The Impact of an Inverted Yield Curve -
Bond yields move in the opposite direction of prices because the bond’s coupon rate is fixed but the appeal of that bond and its coupon rate on the secondary market changes with economic conditions. If interest rates rise, bonds issued with lower coupon rates become less attractive to potential buyers, who could get a higher rate of return on a new bond. Subsequently, the bond’s price declines. An investor who buys that bond at a discount will receive coupon payments on the bond’s face value, not its market value, meaning their return will be greater than the official coupon rate. Yields decrease as bond prices rise for the same reason.
Learn More Understanding Bond Prices and Yields -
You can cash in most paper U.S. Savings Bond at a bank or credit union. The exception is Series HH bonds, which were discontinued in 2004. These need to be mailed to Treasury Retail Securities Services with a specific form. Electronic bonds can be cashed in online at Treasury Direct, which will transfer the proceeds to your checking or savings account within a couple of days.
Learn More How to Cash In Your U.S. Savings Bonds
Key Terms
- Treasury Inflation-Protected Securities (TIPS)
Treasury Inflation-Protected Securities (TIPS) are U.S. Treasury securities that are pegged to inflation. They are meant to preserve the purchasing power of the investor’s principal.
- Basis Points
A basis point is a unit of measurement for interest rates and other percentages in finance. One basis point is equal to 1/100th of a percent, or 0.01%.
- Repurchase Agreement (Repo)
A repurchase agreement (repo) is a short-term borrowing arrangement in which a dealer sells government securities to investors with the guarantee they will buy them back shortly after (usually the next day) at a slightly higher price.
- Yield Curve
A yield curve is a line connecting the yields on bonds of equal credit quality but different maturities as plotted on a graph. The slope of the yield curve signals expectations of future interest rates and economic activity. A normal yield curve slopes upward since bonds with longer maturities usually have higher yields. When the yields on short-term bonds exceed those on long-term debt, the yield curve is said to be inverted.
- Debenture
A debenture is an unsecured loan certificate representing debt that is backed by creditworthiness rather than assets.
![Man with his face in his hands as price of investment declines](https://www.investopedia.com/thmb/9ZIwyPxfSPIMSSylhIOW8LFpwAk=/6000x4000/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1393087427-8ead2c9d9456425cb42bec6d01d0f841.jpg)
![Bond Vigilante](https://www.investopedia.com/thmb/KioU4XuV95eNxlyEzZOAt19DaRU=/1500x1000/filters:no_upscale():max_bytes(150000):strip_icc()/bond-vigilante-6386194_final-7a8a2aaccb5c463e976a5aee89713897.png)
![Giving a present at Christmas](https://www.investopedia.com/thmb/u_wDEB--6sl8uJeGUIXvYm0jXn4=/5472x3648/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-6750200411-08c1f9fa5db74b3981d729b9d29a4803.jpg)
![Financial Services, Viewing Financial Markets for Investing](https://www.investopedia.com/thmb/r841v9Uko7pMmuIxqKnFHFkG4xE=/1500x1125/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-507826251-3e2d89e3555d4df2905e82d76df9678d.jpg)
![](https://www.investopedia.com/thmb/RyrOdVw_tQ1OMixNSpGhDlyfUoI=/285x260/filters:no_upscale():max_bytes(150000):strip_icc()/bonds-lrg-3-5bfc2b23c9e77c00519a93a4.jpg)
Explore Bonds
![](https://www.investopedia.com/thmb/Pc3t97MlcL3XOwGavrLT1dkLvRI=/205x136/filters:no_upscale():max_bytes(150000):strip_icc()/investing15-5bfc2b8fc9e77c00519aa65b.jpg)
![](https://www.investopedia.com/thmb/JwL0jMyplCMWw-aTxOLICwNjSFY=/680x440/filters:no_upscale():max_bytes(150000):strip_icc()/131616451-5bfc2b96c9e77c00263065da.jpg)
![Investment options](https://www.investopedia.com/thmb/rqO2tf1E-iBBoFb1v0mVGP3SApk=/1920x1114/filters:no_upscale():max_bytes(150000):strip_icc()/investment-3999136_1920-7e692563c3ea473d968c27d90ba7c5c6.jpg)
![Close-Up Of Stock Market Data On Digital Display](https://www.investopedia.com/thmb/TFJ6bNkB34A-_Q9AhaLK7yTlYOU=/2120x1414/filters:no_upscale():max_bytes(150000):strip_icc()/close-up-of-stock-market-data-on-digital-display-1058454392-d38a3790c09544038aab63a623c466ba.jpg)
![Sukuk](https://www.investopedia.com/thmb/Xwz5ODuVFvo8RVUYzSKt3FXekmk=/4000x2700/filters:no_upscale():max_bytes(150000):strip_icc()/sukuk.asp_final-1bd6a7cff61f44c78882e54a48d9fe3d.png)
![Mumbai skyline](https://www.investopedia.com/thmb/TLELogcgVHTdpElV_7RxhstK0-Q=/2121x1414/filters:no_upscale():max_bytes(150000):strip_icc()/mumbai-598966778-39aab3e88c154358873835398282457d.jpg)
![Treasury ETF: An ETF that holds baskets of US Treasury securities, each with different yields, durations, and interest payments in their portfolios.](https://www.investopedia.com/thmb/s3mr-CjpWMdgqnEH8MstIZgBgZo=/4000x2700/filters:no_upscale():max_bytes(150000):strip_icc()/treasury-exchange-traded-funds-8536147-final-7e6c3e51d4e24d61a0a08e61fad3ea09.png)
![Couple listening to their financial advisor](https://www.investopedia.com/thmb/RRz1ybmZgj7O_UcjUrNqAxDGeec=/7015x4682/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1414002472-f8a3f116a1814b1da36c9fb9b6e674d5.jpg)
![Man and woman count cash on their counter](https://www.investopedia.com/thmb/yxwVHEBkcwVgLjQhxXuDxgFuLZU=/5119x3413/filters:no_upscale():max_bytes(150000):strip_icc()/bestaccountsforuninvestedcash-91147036afd04192988327f357a7dbbb.jpg)
![Over the shoulder view of Asian woman holding smartphone, analyzing investment trading data on crypto graph with smartphone and laptop while working at home. Cryptocurrency, bitcoin, digital ledger](https://www.investopedia.com/thmb/zgIXCExsAcISphWr7yRKu4CZ7jY=/2121x1414/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1370827731-8629ef54007a4e219cd6a3b133ab6c9b.jpg)
![Elegant brownstones and townhouses in the Fort Greene area of Brooklyn for Rent](https://www.investopedia.com/thmb/IY00of00b2XowLKVTvwCejH6B5o=/4000x2667/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-ways-to-earn-passive-income-in-2023-7481030-fe62d4d820be4ee4aad14a3eb46501a5.jpg)
![Cash Flow](https://www.investopedia.com/thmb/W1aNYpBHkB36qDMDTHuqB4ocCTY=/1200x800/filters:no_upscale():max_bytes(150000):strip_icc()/cash-flow-51a3b0ed86f04c56a0429bb5a25e2b9b.jpg)
![](https://www.investopedia.com/thmb/Pc3t97MlcL3XOwGavrLT1dkLvRI=/205x136/filters:no_upscale():max_bytes(150000):strip_icc()/investing15-5bfc2b8fc9e77c00519aa65b.jpg)
![](https://www.investopedia.com/thmb/f5knozohAfvRWfysIstBnljuvn4=/680x440/filters:no_upscale():max_bytes(150000):strip_icc()/investing5-5bfc2b8e46e0fb0026016f0e.jpg)
![Debt/Equity Swap](https://www.investopedia.com/thmb/x0cX4sYrvDmcoQLzqty_IR5V1tY=/5616x3744/filters:no_upscale():max_bytes(150000):strip_icc()/how-to-make-money-investing-in-exchange-traded-funds-ETF-592c895e5f9b5859508623f0.jpg)
![Business people meeting in boardroom](https://www.investopedia.com/thmb/TzggaeUk85a8Bpa7X8YX44QcWFA=/205x136/filters:no_upscale():max_bytes(150000):strip_icc()/investing14-5bfc2b8f46e0fb00265beb22.jpg)
![Municipal Bonds Written in a Note. Trading Concept.](https://www.investopedia.com/thmb/W4KdyKbAe4sSLW_LCRXP6QBaTQU=/1500x1000/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-687018872-d26bf4aa77584d9fa506dd17b56a0cf7.jpg)
![Dveloped and Emerging Market](https://www.investopedia.com/thmb/Lxa3mkAwXl3ur6aYdHhWv6b3GXI=/1357x628/filters:no_upscale():max_bytes(150000):strip_icc()/Developed_and_Emerging_markets-d47df2679bb147528f8688a754a7011a.png)
![Business Man Using Calculator](https://www.investopedia.com/thmb/tiu-QLshC88jpcbJ6WOjqrEya4Q=/1500x1002/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1086691530-2849ead16bca4654b38fef56c01eecff.jpg)
![](https://www.investopedia.com/thmb/tpGf7zrlA0B6TVZzmG3Wlk-owqU=/680x440/filters:no_upscale():max_bytes(150000):strip_icc()/istock_21195623_small.jpg_bonds-5bfc3af6c9e77c00587b1d2a.jpg)
![Bond ETF](https://www.investopedia.com/thmb/USx22nmllUDSFZQ2kWtn6qZKWE8=/4000x2700/filters:no_upscale():max_bytes(150000):strip_icc()/bond-etf.asp-Final-2c47bfad4b4d4fdd827385354180a893.jpg)
![Investment Theme Stock Market and Finance Business](https://www.investopedia.com/thmb/epMgDZ6X3x4oSEN-nGUWSuYqTu0=/1500x1000/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1064145406-a2fe543a95ea42fdbfae9d4373a812b6.jpg)
![](https://www.investopedia.com/thmb/1jglp8VYgRJnRJGeRIxAEs7ZQxw=/680x440/filters:no_upscale():max_bytes(150000):strip_icc()/149820145-5bfc2b9646e0fb00265bec9f.jpg)
![trash to treasure](https://www.investopedia.com/thmb/6pKyJNMhhXvOOVmMNGOQLgiBDNE=/2104x1427/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-165765260-56aae33c3df78cf772b49fdc.jpg)
![Street view of detached homes](https://www.investopedia.com/thmb/nDC_tz2D1BZZE3wMms483TRnpL8=/6089x4059/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1460942579-c18f3f43f46641819d26e02558522a50.jpg)
![](https://www.investopedia.com/thmb/-zhhJkjtdWtM7LtIDUo_mY1vSq8=/680x440/filters:no_upscale():max_bytes(150000):strip_icc()/thinkstockphotos_80410231-5bfc2b97c9e77c0026b4fb20.jpg)
![](https://www.investopedia.com/thmb/e6SkCG18sEle14mF6UZaLIdrC8s=/680x440/filters:no_upscale():max_bytes(150000):strip_icc()/investing4-5bfc2b8ec9e77c0026b4f956.jpg)
![Rear View Of Businesswoman With Colleague Discussing Graph On Desktop Pc At Office](https://www.investopedia.com/thmb/t7piwrKZBflTdw5VOYl9ZyARAZc=/4896x3264/filters:no_upscale():max_bytes(150000):strip_icc()/rear-view-of-businesswoman-with-colleague-discussing-graph-on-desktop-pc-at-office-1162966574-74936fe476b34b91b631f747c2bc2a56.jpg)
![A young child celebrates as their grandparents use a laptop to show them the value of their savings bonds account.](https://www.investopedia.com/thmb/gnWh6o91yNCYjflETNaluVcy9NM=/6144x3240/filters:no_upscale():max_bytes(150000):strip_icc()/SeriesEEBondDefinitionHowItWorksMaturityGettyImages-2148897949-4cc0123b0e0a405aa1594e52d6d590ff.jpg)
![Young couple looking at receipts](https://www.investopedia.com/thmb/3yi9YkiBECywyt8k0_g37Pwq3gA=/2121x1414/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1488066645-77942d2fbf804fce98f509909e02783e.jpg)
![](https://www.investopedia.com/thmb/bM_VrtTINI_RU0B47FLbxlup1fY=/680x440/filters:no_upscale():max_bytes(150000):strip_icc()/153221908-5bfc2b8c4cedfd0026c118f2.jpg)
![](https://www.investopedia.com/thmb/ZfFmoGBwYPWDHWucT1rGnHUFoO0=/680x440/filters:no_upscale():max_bytes(150000):strip_icc()/thinkstockphotos-461190329-5bfc34ffc9e77c0051818b97.jpg)
![Smaller and larger piggy banks balanced on a lever](https://www.investopedia.com/thmb/ihqzdSouWZmNkV9XmB14m0bNZFo=/2308x1298/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-856823628-865e771e5e134817b6c6c05f1a0b26dd.jpg)
![Man and woman discussing investment options](https://www.investopedia.com/thmb/tyJtQuV8c2iSjLArW6lqrSmLvkQ=/8256x5504/filters:no_upscale():max_bytes(150000):strip_icc()/U.S.SavingsBondsvs.CDsWhatstheDifference-aac24d806ac44975816485c566fe56c5.jpg)
![](https://www.investopedia.com/thmb/_HaN_45y66u3tvtGkxJoC58nZwA=/285x260/filters:no_upscale():max_bytes(150000):strip_icc()/bonds-lrg-4-5bfc2b234cedfd0026c104ea.jpg)
![Stock Market Graph Chart](https://www.investopedia.com/thmb/2isagL5zMfvPu2IKA-CaAyzXV4k=/1500x1000/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1064821934-9a666dd02c084c8fad5a8a97e836ac1b.jpg)
![Businessman using laptop for analyzing data stock market, forex trading graph, stock exchange trading online, financial investment concept. All on laptop screen are design up.](https://www.investopedia.com/thmb/SKSchhCUjTlTo_rOO3iMsDS6wGI=/4500x3000/filters:no_upscale():max_bytes(150000):strip_icc()/businessman-using-laptop-for-analyzing-data-stock-market--forex-trading-graph--stock-exchange-trading-online--financial-investment-concept--all-on-laptop-screen-are-design-up--1069549614-a724a8daa4b944769c39face70371984.jpg)
![Bond Funds vs. Direct Bond Investing](https://www.investopedia.com/thmb/_HneT_bHV92SeYEQ57I0bnYn9IQ=/506x337/filters:no_upscale():max_bytes(150000):strip_icc()/bond-funds-mutual-funds-bond-certificate-56a0910e5f9b58eba4b19fda.jpg)
![Bond Market](https://www.investopedia.com/thmb/Lfc3Zb67XCI4JIhuCX69gCzcUfw=/1200x800/filters:no_upscale():max_bytes(150000):strip_icc()/bond-market-15b215dd1fb741ff82f940a4e7c1d66a.jpg)
![](https://www.investopedia.com/thmb/fDpWuxOAMRsVXJGF6ENzO7AQ0y0=/680x440/filters:no_upscale():max_bytes(150000):strip_icc()/business_building_153697270-5bfc2b9846e0fb0083c07d69.jpg)
![Credit Score Concept](https://www.investopedia.com/thmb/irtKdJ3Ejncy39_dzZ93Ga3cZ2Q=/1500x1000/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-869329236-a5ad94904e8944f787736b3e494b7a4e.jpg)
![](https://www.investopedia.com/thmb/MYoLZHymwhe5h2QLFythoM_GVt8=/205x136/filters:no_upscale():max_bytes(150000):strip_icc()/bonds-lrg-5bfc2b234cedfd0026c104e7.jpg)
![Series I Bond](https://www.investopedia.com/thmb/DHFvOa0pcMyNnUGgKYGLZKpAdPw=/1500x1000/filters:no_upscale():max_bytes(150000):strip_icc()/Terms-series-I-bond-4189218-83494f27ee7b4078b73dd958b616ff1e.jpg)
![Woman showing a document to an elderly woman](https://www.investopedia.com/thmb/9Dqr0yl0NRRNydtQN4YZpClN-lw=/7481x4990/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1792968577-76e7dfb57dda41b09bf098e23d8e9de4.jpg)
![Trading on the Currency Market Forex](https://www.investopedia.com/thmb/UkWeISW5vDGY7cnrJRFdaRNineg=/1500x1000/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1137585640-234dfcaf84ae4f1ebd310a5256ef3362.jpg)
![](https://www.investopedia.com/thmb/gZBAkp5l4HsS5Lz7I0TAyJa9G88=/680x440/filters:no_upscale():max_bytes(150000):strip_icc()/shutterstock_151894871-5bfc367046e0fb00517e3226.jpg)
![Half Stock](https://www.investopedia.com/thmb/FEB4BMSGZZ3P84TMhY9pFrczMZY=/4000x2700/filters:no_upscale():max_bytes(150000):strip_icc()/halfstock.asp-final-c03cbd202c0c44ae856c95d5f65f676e.png)
![Bid Bond: A guarantee to the project owner that the bidder will complete the work if selected.](https://www.investopedia.com/thmb/ckHLPMtA0nv8IUvK0g39bWychWw=/4000x2700/filters:no_upscale():max_bytes(150000):strip_icc()/bid-bond.asp-final-7fa7af0bec5c4b52b658860654202380.png)
![Investment advisor in an office giving two potential investors information about bond funds.](https://www.investopedia.com/thmb/0sqaFnZr7jOpuxWFn-6cZOFp6Fk=/6000x4000/filters:no_upscale():max_bytes(150000):strip_icc()/TotalBondFund-2e026ec97f3149b6a9574cd7f8b6e532.jpg)
![Abstract mirror building texture](https://www.investopedia.com/thmb/7pgyf_EsIbE8iwye7wRgKpTwbLI=/2117x1416/filters:no_upscale():max_bytes(150000):strip_icc()/abstract-mirror-building-texture-1027237872-13a30e3494fa486d9ac2e43328d73174.jpg)
![](https://www.investopedia.com/thmb/MYoLZHymwhe5h2QLFythoM_GVt8=/205x136/filters:no_upscale():max_bytes(150000):strip_icc()/bonds-lrg-5bfc2b234cedfd0026c104e7.jpg)
![](https://www.investopedia.com/thmb/TzggaeUk85a8Bpa7X8YX44QcWFA=/205x136/filters:no_upscale():max_bytes(150000):strip_icc()/investing14-5bfc2b8f46e0fb00265beb22.jpg)
![Stock exchange market display screen board on the street showing stock rises in green color.](https://www.investopedia.com/thmb/jJSFdHQSgqlGfsferqpmfehg8jQ=/2121x1414/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1027040192-350447471c284267b31df4e2690435d7.jpg)
![Rate Level Risk](https://www.investopedia.com/thmb/PnnhFYgosqs1dV-Uep9XbFhpLh4=/4000x2700/filters:no_upscale():max_bytes(150000):strip_icc()/Rate_Level_Risk_ASP_V1-4162225c4be44d5d9f49c0137f0d8ab6.jpg)
![A set of physical shares out of focus](https://www.investopedia.com/thmb/fvEpErTc3QI_P8BLgzDkG_ok7uM=/5119x3413/filters:no_upscale():max_bytes(150000):strip_icc()/are-bonds-safer-than-stocks-58dc27f03df78c5162810026.jpg)
![Pile of Series I U.S. savings bonds](https://www.investopedia.com/thmb/4rN44vafuzb5rMIzyrp_FFkZ-Bg=/6240x4160/filters:no_upscale():max_bytes(150000):strip_icc()/INV-IBonds_GettyImages-1335987568-e8ce10d458fb4998adad1ead4d31280c.jpg)
![A mature investor rubs their chin as the look at an announcement from a bond issuer to call in a bond and pay yield maintenance premiums.](https://www.investopedia.com/thmb/b1wc_1XIwV0dK8ABITnbXL6DNa4=/5898x3924/filters:no_upscale():max_bytes(150000):strip_icc()/YieldMaintenanceDefinitionFormulaandHowItWorks-b5c84acf9a1949f19176008bd4e0e4eb.jpg)
![](https://www.investopedia.com/thmb/Zbz-65TrdS83BdXRo40Br-lWYQw=/205x136/filters:no_upscale():max_bytes(150000):strip_icc()/activetrading16-5bfc2b9ac9e77c005143f30a.jpg)
![A percentage sign made of grass on a cloudy backdrop](https://www.investopedia.com/thmb/J_dOxxQx5FQ5qXI736v8CsYVOQo=/2070x1449/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1142496360-eacb27eca4b74408ba3e169d7802612e.jpg)
![Close up of U.S. bonds in $500 and $1000 denominations](https://www.investopedia.com/thmb/zUZPUn5MN04ivsvg9lIhVVDFuUE=/2121x1414/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1277680562-bb84e47afff54fc1a1361435596d08cb.jpg)