A treasury bond is defined as a marketable, fixed US government debt security which has a maturity of more than 10 years. Treasury bonds make interest payment semi-annually and only the federal tax is deducted from this amount. The bonds are initially sold through auctions. After the auctions, the bonds can be sold in the secondary market as well.
The treasury bonds are also called treasury bills which are securities, issued by the US government. When you buy a treasury bond, in other words, you are lending money to the government. Security is referred to as a medium of investment like bill, stocks and bonds. If the bonds are sold at a price more than their face value, it is termed as ‘selling at a premium' and if it is sold lower than the face value, it is called a ‘selling at a discount'. The face value is the original agreed buying price from which the interest rate is calculated.
For instance, let's say that you have a treasure bond of face value $1000 at an interest rate of 6% with 10 years maturity periods. If you do not have any plans of selling the bond in the secondary market, you can enjoy $60 annually. Suppose if we do not buy the bond in an auction and purchase it from the secondary market with a face off value of $1200. You have bought this bond as a premium. The interest rate will be $60 a year and the yield will be 5%. However if you buy the bond for $800, as it is a discount type of bond, your yield will be 7.5%.
The Treasury bond thus gives you two opportunities. If you are not interested in trading, you can enjoy yearly profits. On the other hand, if you are a bounty hunter and are interested in earning more money, the stock market is open for you. Just read the terms and conditions carefully and enjoy the benefits of treasure bonds.