Government bonds interest
Dear Dr. Don,
If I buy a 30-year U.S. Treasury bond, will I receive a monthly check for the interest earnings?
Thanks,
— Peter Pecuniary
Dear Peter,
U.S. Treasury securities that pay what’s called “coupon interest” make those payments semiannually. A 30-year U.S. Treasury bond falls into that category. The most recently issued 30-year bond has a 2.75 percent coupon.
The coupon rate determines the interest payments. The 2.75 percent is the annual coupon. The bond will pay $27.50 per year for every $1, 000 in face value that you own. The semiannual coupon payments are half that, or $13.75 per $1, 000.
If you have a TreasuryDirect.gov account and use it to buy and hold U.S. Treasury securities, the coupon interest payments will be made directly into your bank account. If you own these securities in a brokerage account, the coupon interest payments are made into your brokerage account. The U.S. Treasury does not issue checks for interest payments.
U.S. Treasury marketable securities — Treasury bills, Treasury notes and Treasury bonds — have minimum denominations of $100. If you’re buying in $100 denominations, you should plan to hold the investments to maturity, because selling them is both a hassle and expensive. Treasury bills don’t pay coupon interest, but Treasury bonds and notes do. Treasury bills are sold at a discount to face value, and the investor receives the face value when the T-bill matures.
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