Understanding Treasury Bonds and Other Investments

Do Treasury bonds have a place in your portfolio?

By Adam Levy – Updated Sep 19, 2025 at 2:32 PM | Fact-checked by Margo Winton Parodi

Key Points

Treasury bonds are low-risk loans to the U.S. government, typically paying out interest on a regular schedule.
Like all bonds, they're still subject to interest rate risk: If rates rise, bond values fall.
Treasury bonds are exempt from state and local taxes, but still taxed federally.

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A bond is simply a loan that you make to a particular entity -- it could be a corporation, a municipality, or, in the case of T-bonds, the federal government. You make an initial loan amount, called the principal, and receive interest payments until the loan comes due in the future or at its time of maturity. At maturity, you should receive your entire principal back plus the final payment of interest you're owed.

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Bonds

Bonds are debt securities that entitle the holder to receive interest payments.

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Interest Rate

An interest rate is the cost of borrowing money or the premium you get for lending money. Learn how interest rates affect the economy.

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Yield Curve

The yield curve shows the relationship between interest rates and bonds. Learn how it’s used to predict the course of the economy.

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About the Author

Adam Levy is a contributing Motley Fool stock market analyst covering technology, consumer, and financial stocks and how policy, economic, and consumer trends shape personal finance, Social Security and retirement savings. Before The Motley Fool, Adam was a financial advisor at Edward Jones. He studied finance and electrical engineering at Carnegie Mellon University.

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