Skip to content →

The Best Way to Invest in US Treasuries

Last updated on 12 de March de 2023

US Treasuries are one of the most popular investment instruments in the world. In this post we will see the best way for you to invest in US Treasuries. We will also discuss their main advantages and risks.


What are US Treasuries

US Treasuries are debt securities issued by the federal government of the United States. Because government expenditures often exceed tax revenues, bonds are issued to finance that gap.

US Treasuries represent the largest debt market in the world. And they are considered one of the safest and most liquid financial instruments that exist, as they are guaranteed by the US government and all its related institutions, including the Federal Reserve Bank, the central bank of the United States and issuer of the US Dollar currency.

Whenever the US government needs money, it goes to the financial markets and sells bonds, known as Treasuries. The most important features of these bonds are the coupon or interest rate and its maturity date.

The coupon is the interest paid by these bonds, for example 4%. This interest is usually paid on a semi-annual basis. In our example, we would receive 2% every 6 months.

The maturity date is the date on which the US government will pay back the principal of the bond. And it is a very important aspect. Maturities range from 1 month all the way to 30 years.

Because existing bonds mature, new bonds are issued continuously. In fact, there are more than 500 different US Treasuries. All of them with different coupons and maturity dates.

How to Invest in US Treasuries

There are three main ways to invest in these types of bonds:

Exchange-Traded Funds (ETF)

The easiest way to invest in US government bonds is through exchange-traded funds, known popularly as ETFs. These funds have very low management fees, can be bought and sold at any time on an exchange and, most important of all, allow you to choose which types of bonds you want to invest in.

What do I mean by choosing what to invest in? Well, you decide if you want to invest in all US Treasuries or just a subset. There are US Treasury bond ETFs that only invest in bonds of certain maturities. For example, bonds maturing in less than 12 months, 1 to 3 years, 7 to 10, or 20 to 30.

In general, the longer the maturity, the higher the interest, the potential for capital gains and the diversification they offer. But those also carry higher risk. And longer maturities do not always offer higher interest rates.

These ETFs are managed by several fund management companies. One of the largest is Blackrock, who manage the iShares funds. The following link will show you all US Treasury ETFs they have. You just have to look for the one you want to invest it and then find it in your broker:

Remember that Blackrock is not the only company offering these funds. There are many more. Simply search for “US treasury ETF” in your broker’s search function to see what funds are available to you.

Investment Funds

Another option to invest in this type of bonds is to do it through a traditional investment fund. These are usually called mutual funds and there are many different types. You can choose between funds that only invest in US Treasuries, several types of bonds, or even funds that combine bonds and stocks.

The main disadvantage of investing through traditional investment funds is that they usually have higher management fees. This has the potential of lowering your net investment returns in the long term.

At the same time, traditional mutual funds might give you less control. For example, if you want to invest in both bonds and stocks, it is usually best to pick a bond ETF and a stock ETF, rather than a mutual fund that invests in both asset classes.

Buy US Treasuries directly

Buying US Treasuries directly is possible as well, as long as your broker allows you to. It is a very good alternative because it gives you a lot of flexibility. If you want to invest in long-maturity bonds, you can do so through an ETF that holds bonds with maturities ranging from 25 to 30 years, or you can buy one single US Treasury with a long maturity.

For example, Interactive Brokers allows you to buy individual US Treasury bonds in increments of $1,000. Therefore, you can choose any bond you like, a buy $3,000 or $300,000 in notional value.

The great thing of investing in individual bonds is that you can look for those that offer slightly higher yields than the rest, the interest payments will be paid directly into your account and there is more customization you can benefit from when it comes to building your investment portfolio.

Advantages of US Treasuries

There are a number of reasons why US Treasuries are attractive assets to own:

High Returns

The interest rate hikes of 2022 and 2023 mean that US Treasuries have become a very attractive asset class to invest in. Investing in US Treasuries can yield returns higher than 5% without taking virtually any risks.

Thus, short-term US Treasuries can yield worth of 5% and are almost as liquid as holding cash in the bank. Longer term bonds, maturing in 10, 20 or 30 years, will yield between 4 and 4.5%.

In a world full of uncertainty, US Treasuries are one of the most attractive asset classes to own. Not only can they act as a diversifier, but also add good returns to out investment portfolio.

Regular Interest Payments

Collecting interest payments on a regular basis without taking any risks is appealing to many investors. It is a guaranteed return as there is virtually a zero percent probability of the US government failing to make good on its promises.

If you want to know what how much interest you can expect from bonds with different maturities, here is the link to the website of the US Treasury.


US Treasuries are one of the best diversifying assets in the market. That is because we know for sure how much we are going to get paid and when, regardless of what happens in the economy. They are a safe haven asset, very much like gold.

This does not mean that bonds are risk-free. They have their own risks, as we will see later. But their risks are different from those of most other assets. If you own stocks, real estate and gold, an economic deflationary downturn can severely damage your portfolio. And those would be best times for US Treasuries to shine.

Additionally, if you live outside the United States, these bonds allow you to have money invested in an asset denominated in US Dollars. Another source of diversification.

Capital Gains Potential

In addition to paying interest on a regular basis, bonds fluctuate in price constantly. When interest rates rise, bond prices fall. When interest rates fall, bond prices rise. And those price movements are more pronounced for longer maturity bonds. If you want to understand the relationship between interest rates and bond prices, check out this post:
The Duration of a Bond

Because long-maturity bonds are the most volatile and risky, they also offer the greatest potential for capital appreciation. This is especially true in a scenario of economic crisis and deflation. In those circumstances, these types of bonds can experience breathtaking rallies.

An interest rate drop of 1% in a 30-year US Treasury bond can easily translate into a capital gain of around 25%. Hence, a 2% drop would be close to a 50% price increase.

Making a lot of money with bonds is possible. We just need to have the proper macroeconomic setup. That means that capital gains are most likely to happen when we need a diversifier in our portfolio. A great way to cushion a stock market crash.

No Risk of Default

It may seem obvious, but we must mention it. Because these bonds are guaranteed by the US government, the risk of default is virtually zero. Even in the event of the US government being completely broke, the Federal Reserve Bank could simply print that money and pay off the bondholders.

Risks of US Treasuries

While a safe haven asset, investing in US Treasuries does not come without risks:

Currency Risk

If you do not live in the United States, investing in US Treasuries exposes you to currency risk. Currency risk means you can lose money if the dollar loses value against your national currency. That is part of investing in overseas assets.

While currency risk can be hedged, it is by no means a requirement. If you want to learn more about the subject of currency hedging, I explain it in detail in this post:
Should you hedge your FX risk?


The biggest risk of investing in US Treasuries is inflation. Especially when interest rates are low. In fact, that is the reason why it is not wise to invest all our money in bonds. Inflation causes money to lose value. And bonds are nothing more than a promise to receive money in the future.

Consequently, we need to have other assets in our portfolio that will respond better if there is inflation: gold, real estate, stocks, and commodities. These assets offer the most protection against inflation. Government bonds will you in case of recession and deflation.

Rising Interest Rates

Finally, a rise in interest rates could make us lose money. Remember that bond prices move in the opposite way to interest rates. Therefore, if interest rates go up, bond prices fall. The price action seen in the US Treasury market in 2022 certifies that. Higher interest rates have led to a crash in treasury prices.

This risk is especially important, as interest rates are most likely to increase when inflation is high. That means we can see bond prices drop while the value of the currency is going down. Additionally, higher interest rates also hurt other asset classes, like stocks, as they essentially represent an increase in the cost of capital to businesses.


As you have seen, investing in US government bonds is a great option to diversify away some of the risks of our portfolio. Diversification will be highest if we invest in long-term bonds but remember that those are also the ones with the most risk. Hence, we always need to consider our investments in the context of our overall portfolio.

If you liked this information, I invite you to subscribe to my newsletter:
Clear Finances

Published in Bonds Funds and ETF

Comments are closed.