How to buy U.S. Treasury bonds? How to calculate the interest rate? Understand it all in one article!

What exactly are U.S. Treasury bonds?

U.S. Treasury bonds, which are essentially U.S. government debt, are certificates that signify the U.S. government borrowing money from the public. When money is borrowed, it naturally needs to be repaid with interest.

The credit of the U.S. government is extremely strong. This is beyond doubt. Therefore, U.S. Treasury bonds are considered one of the safest havens in the global investment community. With good liquidity and stable returns, they have attracted the attention of countless investors.

There are many types of US Treasury bonds, how should one choose?

Short-term Treasury Bills (T-Bills): They mature within a year. No interest, sold at a discount. You pay $95 to buy, and get back $100 at maturity. Quick.

Treasury Notes (T-Notes): 2-10 year term. Interest paid semi-annually. Stable.

Long-term Treasury Bonds (T-Bonds): 20-30 year term. Also pays interest semi-annually. Long-term.

There are also Treasury Inflation-Protected Securities (TIPS): they are special because the principal increases with rising prices. They retain their value best during severe inflation.

Short-term Treasury Bills: A good place for cash to park.

Short-term government bonds are like sprints, 4 weeks, 13 weeks, 26 weeks, or 52 weeks, and they quickly reach the finish line.

It does not pay interest directly, but sells it to you at a discount. For example, a short-term Treasury bill with a face value of $100 and a 1% yield can be purchased for only $99, and you will receive $100 at maturity.

Funds not needed in the short term can be placed here for maximum flexibility.

Mid-term Treasury Bills: The Market Barometer

2 to 10 years, a moderate duration. These bonds pay interest to you every six months, very regularly.

The 10-year government bond is particularly important. It is known as the “anchor for global asset pricing.” Many financial decisions look at its trend. The eyes of the market.

Long-term Treasury Bonds: Rewards for the Patient

A time span of 20 to 30 years is large. But don't worry about liquidity, the secondary market can be bought and sold at any time.

Long-term holding, stable income, suitable for patient investors.

TIPS: Weapons Against Inflation

TIPS are quite interesting. Its principal will adjust according to the CPI index. If prices rise by 10%, your principal will also increase by 10%.

Interest is calculated based on the adjusted principal, so the actual yield is higher than it appears.

For example, if you buy TIPS for 1000 dollars with a 1% interest rate, if inflation reaches 5%, the principal will become 1050 dollars, and the interest will be 10.5 dollars instead of 10 dollars. During deflation, the principal will decrease, but at maturity, at least the original amount will be returned. It's quite a flexible design.

How do Taiwanese people buy U.S. Treasury Bonds? What are the channels?

There are basically three ways to buy U.S. government bonds in Taiwan: directly buying bonds, bond funds, and bond ETFs.

1. Directly purchasing bonds: straightforward but with a high threshold

You can buy through overseas brokers or domestic brokers by means of sub-delegation. Personally, I feel that overseas brokers are more convenient, have a wider variety, and lower costs.

However, there is a threshold issue when buying bonds directly. Usually, it requires a minimum of $1,000, and the capital requirement is not low. The advantage is that you have complete control over what you hold and when to sell.

The operation is also simple: open an account, find bonds, place an order, receive interest or sell. The whole process is electronic.

2. Bond Fund: A basket of bonds

Bond funds are like buying a basket of different bonds. They provide risk diversification, require a low initial investment, and you can get started with just $100.

The downside is that there are various fees. Management fees, subscription fees, redemption fees… eat into some of the profits.

3. Bond ETF: The Top Choice for Small Investors

Bond ETFs are traded like stocks, with low costs and high liquidity. They are very suitable for small investors.

Popular US Treasury bond ETFs on the market include:

• TLT: Long-term Treasury Bond ETF
• IEF: Intermediate-Term Government Bond ETF
• SHY: Short-Term Treasury Bond ETF
• VGSH: Another good short-term government bond ETF
• TIP: Inflation-Protected Bond ETF
• GOVT: Comprehensive ETF covering various maturities

As of October 2025, the yield on short-term bond ETFs like VUSB is around 4.4%. That's a pretty good return.

What exactly is that mysterious yield?

The yield on government bonds is an indicator of how much you can earn from your investment. There are two calculations: current yield and yield to maturity.

The yield to maturity (YTM) is more comprehensive, as it calculates the real annual return you can receive if you hold it to maturity. It fluctuates depending on the difference between the purchase price and the par value.

How to calculate?

The current yield is simple: annual interest ÷ current price × 100%

As for YTM, the calculation is complex, but fortunately, you don't have to calculate it yourself. There are many channels for inquiry:

• Federal Reserve Official Website
• Financial websites such as Investing.com
• Brokerage Platform

Key Factors Affecting US National Debt

Bond prices and yields have an inverse relationship. When prices rise, yields fall; when prices fall, yields rise. It's somewhat counterintuitive.

The main factors influencing government bonds are:

internal factors

Term and coupon rate: The longer the term, the greater the risk, and the interest rate is usually higher.

external factors

1. Interest Rate Environment: When market interest rates rise, the prices of old bonds will fall. Why? Because newly issued bonds have higher interest rates, who would still want to buy old bonds with lower rates? Unless they become cheaper.

2. Economic Situation: During economic downturns, capital flows into safe assets, causing government bond prices to rise.

3. Inflation: When inflation rises, government bond prices typically fall. After all, who wants a fixed income eaten away by inflation?

4. Issuance Volume: When too many government bonds are issued, supply exceeds demand, and prices naturally soften.

US Treasuries vs Other US Assets

In addition to buying U.S. Treasury bonds, you can also invest in U.S. dollars, U.S. stocks, etc. through contracts for difference.

Contracts for difference are a rather special financial instrument. You do not need to actually own the asset, just predict the price trend to earn the difference. They can be operated in various markets such as stocks, foreign exchange, and commodities, offering great flexibility.

This investment method allows you to participate in market fluctuations without actually holding the assets. It's somewhat like betting on the asset price rather than truly owning it. It's flexible but also carries considerable risk.