Hi tigers～
In the financial realm, U.S. Treasury Bonds (USTs) are considered risk-free assets and serve as the benchmark for pricing all other financial assets. Currently, U.S. Treasury Bond yields are at a cyclical high,, making them still valuable for asset allocation. However, before investing in U.S. Treasury Bonds. It's essential to understand a few fundamental points:
Bond prices and yields are inversely related. When purchasing U.S. Treasury Bonds. Individuals should pay attention to the yield rates. （As of March 5, 2024,） the yields for 3-6 month bonds are around 5.3%, 12-month bonds around 5.0%, and 20-year long-term bonds around 4.4%. Your decision should reflect your specific requirements.
（ Tiger Trade app - Market - Wealth - U.S. Treasury
Long-term bonds are more susceptible to changes in interest rates. If you do not intend to hold the bond until maturity, you may incur investment losses. This is because if market rates rise, your purchased long-term bonds may be sold off, causing bond prices to drop, thereby increasing the bond yield to align with future higher market rates.
Short-term bonds (T-Bills) are usually sold at a discount below 100, meaning you purchase them at a price below the face value and receive the face value at maturity. Therefore, short-term bonds do not yield interest income. Your investment return comes from the difference between the purchase price and the face value received at maturity.
Long bonds are priced based on market rates and may be sold at a discount or premium. They typically pay dividends semi-annually. The bond yield of long bonds is the sum of the face value return and interest income. The expected yield rate will be displayed below the price when you make the purchase, so pay attention.
1 . Although purchasing U.S. Treasury Bonds and U.S. Treasury ETFs target the same investment. There are differences:
A. The yield of U.S. Treasury Bonds are fixed when you buy them. As long as you can hold them until maturity, you are shielded from market fluctuations, ensuring principal and interest preservation.
On the other hand, U.S. Treasury ETFs simulate the yield fluctuations of U.S. Treasury Bonds. You need to enter the market at the right time, bet on the correct yield trend, and obtain fund appreciation + fund dividends. (There is a risk of loss with U.S. Treasury ETFs).
B.The purchasing fee for U.S. Treasury Bonds is typically $5 (though this may vary depending on the broker or trading platform). For U.S. Treasury Bond ETFs, in addition to transaction fees, there's also a management fee of 0.15% or higher. The ETF management company acts as an intermediary, deducting a portion of the U.S. Treasury Bond returns as a management fee. For risk-averse individuals, it's crucial to carefully consider these factors before entering the market, especially when dealing with U.S. Treasury ETFs that primarily focus on long-term bonds. Therefore, it's essential to consider these factors to ensure that your decisions align with your investment goals and risk tolerance.
By now, you should have a better understanding of purchasing U.S. Treasury Bonds. How do you actually purchase them through the Tiger Trade app?
Open Tiger Trade app - Market - Wealth - U.S. Treasury, and you can place an order for the U.S. Treasury Bonds you need.
If you still have any questions: Click to learn 4 lessons | How to invest in US Treasury bonds
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