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What Is a 30-Year Bond Yield?

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  • Written By: Geri Terzo
  • Edited By: A. Joseph
  • Last Modified Date: 14 August 2019
  • Copyright Protected:
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    Conjecture Corporation
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One asset class that brings some stability to an investment portfolio is fixed income, and included in this category are debt or bond investments. These securities can be issued by several sources, including a government, municipality or a corporation. A 30-year bond is a security issued by the United States Treasury Department, and the main components are a price and a percentage yield. The yield on the security, known as the 30-year bond yield, is the annual rate of return that investors earn based on an interest rate. Bond prices and interest rates move inversely, so when a bond price rises, the rate goes down.

Bonds are issued into the financial markets as a way for the issuers to raise money for an event. Investors are the lenders, and depending on the level of risk that is taken on with the purchase, the interest rate, which determines the bond yield, will vary. The more conservative the investment, the lower the return usually is, and a greater risk yields a greater rate of return. A 30-year bond yield is the longest-duration bond offered by the U.S. government, and it is considered a safe investment because the only way that investors will not be repaid is if the entire government defaults.

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Determining the return or yield on a bond investment requires a calculation. The equation is to divide the value or monetary amount that will be paid to an investor over a 12-month period by the price of that bond. So if a 30-year bond yield with a face value of $1,000 US Dollars (USD) will pay investors $5 USD per month over a year, that is $60 USD. That is divided by the price or principal amount of the bond, which in this example is $1,000 USD. The 30-year bond yield thus amounts to 6 percent per year.

Bond investors receive consistent interest rate payments from the bond issuer throughout the year, and in the case of investing in a treasury bond, the distribution is made by the government. Those payments do not last into perpetuity but have an expiration date. On that day, investors get back the principal amount of the initial bond purchase, and interest payments stop. An investor can sell a bond prior to the expiration date, however.

Investors large and small usually invest in some type of bond security for the dependable nature of these investments. Stocks can rise and fall several times within a trading day, but bonds tend to be more steady even if the payout is not excessive. Investors who choose to earn a 30-year bond yield are also patient investors, because as the name suggests, the face value will not be paid for 30 years.

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