T BONDS introduction and background |
T Bonds are US government bonds with long maturity dates. Their price, and accordingly yield, reflect levels of investor confidence in the ability of the American state to pay its debts. T Bonds and their shorter-term equivalent T Bills are used globally as the ‘risk free rate’ and held as cash equivalents.
Typical T Bond maturities are 20 or 30 years, with interest paid every six months until maturity. Yields on T Bonds have an inverse relationship with prices and are normally low, though higher than for short, dated T Bills.
The yield of T Bonds is determined by the financial standing of the American state and general investor confidence. T Bonds are globally considered a risk-free asset and alongside T Bills set the minimum returns or ‘risk free rate’ for investors.
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