What is a treasury bond?

A treasury bond is indeed a long-term debt security issued by the government, making it a crucial component of the financial landscape. These bonds are issued by the U.S. Department of the Treasury to finance government spending and are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.

Treasury bonds typically have maturities of greater than 10 years, with common terms being 20 or 30 years. Investors in these bonds receive interest payments, known as coupon payments, every six months until maturity when the principal amount is returned. This feature makes them attractive to investors seeking stable and predictable income.

Understanding treasury bonds is crucial as they play a significant role in both individual investment portfolios and broader economic indicators, such as interest rates and inflation expectations. In contrast, the other options mentioned do not accurately describe treasury bonds, as they refer to different types of securities that do not share the characteristics or purpose of treasury bonds.