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T Bonds - Trading and Yield

Treasury Bonds are long term Government securities. Their maturities are over 10 years out to 30 years and are often used in block trading. They are backed by the US Government, thus they carry no credit risk. Their yields reflect interest rates and supply and demand.

T Notes pay interest every 6 months and they are priced in 32nds. Many loans are priced off of the various maturities of these bonds.

These securities are auctioned semi annually or longer and bidded on by US Government securities dealers.


The yield on treasury bonds reflect the supply and demand of debt and interest rates long term. Since they are AAA quality, they will yield less than private debt securities or Government Agency Bonds. Yields will fluctuate as part of the yield curve that other securities and loans are priced off of.


T Bonds are actively traded in a global market. The brokers who engage in the trading of these securities will normally trade them in large blocks, as the spreads can be thin for smaller amounts.

"Since it was first published in 1989, The Treasury Bond Basis has grown to become a mandatory reference book for every professional trader of Treasury bond and note futures. An insightful analysis of the complex relationship between the cash market and futures market for Treasury bonds and notes, its information and influence have helped thousands of hedgers, speculators, and arbitrageurs to understand and profit from that relationship."

How to Sell Treasury Bonds and Portfolio Trading

An example of a treasury bond would be: Bid 101-16 Ask: 101-24. If your client wanted to buy $10,000 of this treasury bond, you would see the price to you at 101- 24 (24/32). 24/32 = .75. So the price is really 101.75 or $10,175. Each point represents $10 for every $1000 par bond. For $10,000, each point is worth $100. All bonds trade at a minimum of 1000. Institutions normally buy $250,000 up to tens of millions per trade. So, our example of a $10,000 trade really isn’t realistic and would not be worth your time. A “tick” by the way, is if the price went up to 101-25. Trading for a few “ticks” on $100,000 would make you very little. If you factor in ticket charges, you might make $100 on the trade. You only present treasuries if it’s non competitive, or if the client is investing at least $1,000,000, otherwise it won’t make you much. If your client deals with 3 other brokers on treasuries, you will all be fighting for very little money. It’s very easy to get a quick quote on treasuries.

Every major dealer owns them, and they can be purchased quickly. You or your trader will contact a major brokerage firm (Merrill Lynch, UBS etc.) and buy them. Not much money yes, still, it is assets you are controlling, and it could be used as available money to swap out of into a better investment for the client. Treasuries are very safe of course, that’s why they are bought. They are a “no brainer” for institutions looking to buy millions of something. The rate of return will be lower than everything else though. Only buying treasuries will diminish the rate of return of the entire portfolio, if that is their only or main investment vehicle. Treasuries offer flexibility though. The market values on them will normally hold up well over time. They are very liquid and can be traded instantly. They should be used to “get in the door” and sacrifice the mark up, or lack of mark up to get the client. You should use them only as “time bucket” or maturity gap placing. If you see the bank has nothing maturing in the first half of 2025 for instance, you can recommend treasuries there too.

Remember, institutions are looking for best price, but also good advice. The medium sized banks ($50 million - $500 million assets) will value good planning and thoughtful recommendations over dealing with 10 brokers all day. The larger institutions are more complicated, and require more price awareness. They think they have the ideas covered and you may have to just be an order taker with them. That is why I preferred the smaller to medium sized bank. I’ll take 50% of a $200 million bank over 10% of a $900 million dollar bank anytime. It also allows for creativity and loyalty. Do them right and the business will be there, and they will be more apt to listen to good ideas.

Copyright American Investment Training, Inc. Treasury Bond Investing and Treasury Securities Information Service