What Is a 5-Year Treasury?

A 5-year treasury is an investment product released by the United States Treasury to raise funds for government operations. These investments are available on the primary market through periodic sales coordinated by the Treasury, as well as on the secondary market, where investors may buy and sell securities at varying costs. Treasuries are a very stable investment as they are backed by the US government, and they are highly liquid in nature.

The 5-year treasury pays out interest every six months. The amount of interest is fixed, and depends on market conditions at the time of issue. When it matures at the end of five years, the holder receives the face value. Investors can choose to hold the investment for the duration of the five years, or to sell it if they need to convert the face value into liquid cash. Treasuries may sell above or below their stated value, depending on the circumstances of the sale.

An investor can obtain a 5-year treasury through a broker or directly from the government, and the government requires a minimum investment. Releases occur on a regular schedule, although the total amount of securities available can fluctuate, depending on how much money the government needs at any given time. Many other governments issue similar public debt, using investment from members of the public to fund their activities.

Interest rates on a 5-year treasury are usually low and it is possible to earn more interest with other kinds of investments. The primary benefit is the reliability; it is very unlikely that the government will not redeem the debt when it matures. For investors who need a stable investment that does not require maintenance, a 5-year treasury can be a good option. Treasuries, as securities issued by the Treasury are known, come in a number of terms including very short T-bills as well as longer debt obligations running 12 years or more.

Many financial publications provide information about Treasury securities as a matter of public interest. Investors usually want to know about the latest yield information, and interest rates on other investment products may be pegged to Treasury securities. Rises and falls can provide important information about the direction of the market, and investors tend to watch government debt carefully to make projections about market movements as well as governmental stability.

Investors who want to purchase treasuries on the secondary market should make sure they understand the terms associated with the products they purchase; they do not want to miss out on interest payments, for example, by mistakenly buying the wrong product.