Here's How Much $10,000 Would Earn in Treasury Bonds

Treasury bonds, aka T-bonds, are long-term investments sold by the U.S. government. You buy them, get interest payments every six months for 20 or 30 years, then get the face value of the bonds back when they mature.

Most recently, 20-year T-bonds offered an interest rate of 4.750%, while 30-year T-bonds paid 4.625%. That's a higher rate than you can get from a savings account, certificate of deposit, or money market account.

Let's look at how much $10,000 could earn if invested in T-bonds, as well as whether you should buy T-bonds now.

How much would $10,000 earn in T-bonds?

First, a little context on how T-bonds work. If you're unfamiliar with T-bonds, I promise this is worth it.

The interest rate on T-bonds is fixed, but the price of T-bonds changes based on demand. That means your return on investment, or yield, depends partly on how much you pay for your T-bonds. The less you pay, the higher your yield, because you're getting the same interest payment for a lower price.

To keep things simple, let's say you bought your bonds at face value, which is basically the "sticker price" set by the government. The interest payments you get twice per year are based on the face value, and the face value is also the amount you'll be paid once the bond matures.

New T-bonds are only issued once every few months, and every batch may have a different interest rate than the last one. We'll assume you purchased them during the most recent auction, in mid-February.

Now, with that out of the way…

Just tell us the earnings!

20-year bonds maturing in February 2045 pay an interest rate of 4.750%. If you had bought $10,000 worth of these, you'd earn $9,500 in interest over 20 years.

The 30-year bonds maturing in February 2055 pay an interest rate of 4.625%. A $10,000 investment would earn you $13,875 in interest over 30 years.

And if you'd bought these bonds at face value, your initial investment of $10,000 would be repaid in full when the bonds matured.

Want to earn an interest rate of up to 4.50% with no hassle? Check out our list of the best high-yield savings accounts.

Should you buy T-bonds now?

T-bonds are best for people who want to safeguard their investment and earn guaranteed income for a very long time. For example, people who are in or near retirement may want to invest part of their portfolio in T-bonds.

Recently issued T-bonds have paid just about the highest interest rates we've seen since 2008. If you want to lock in a high interest rate for decades, now might be the time.

There are several ways to buy T-bonds:

• At auction: You can purchase T-bonds at auction, either directly from the government at TreasuryDirect.gov or through a broker. The next batch of new 20- and 30-year T-bonds will be auctioned off in May. We don't know what the interest rates will be yet, but they likely won't change by more than 50 basis points.
• On the secondary market: You can purchase existing T-bonds from other investors at any time through a broker. However, prices go up and down, so you may not get the best deal. For example, 20-year T-bonds maturing in February 2045 are now selling at a premium, so you'll get less bang for your buck.
• Through an exchange-traded fund (ETF): There are ETFs that regularly purchase new Treasury bonds. You can buy a share of these ETFs the same way you'd buy a stock, and then you own a piece of all those bonds (and get your share of the interest payments). This is the easiest way to invest in T-bonds, though you can't pick and choose which bonds you buy. ETFs charge investors a small fee, too.

Many stock brokers allow you to buy T-bonds at auction or on the secondary market, including Fidelity, Charles Schwab, and E*TRADE from Morgan Stanley, to name a few. Even more brokers allow you to purchase T-bond ETFs. To get started, check out our list of the best stock brokers and open a new brokerage account today.