The 30-year Treasury yield was 5.17% on Aug. 25, while my savings account pays 3.80% APY. On $25,000, that 1.37-percentage-point spread represents roughly $343 more in annualized return before taxes at today’s rates. That is enough money to get my attention.
I’m still not taking it.
The reason is not that Treasuries are somehow unsafe. They are backed by the U.S. government. The problem is that this particular $25,000 has a job: it needs to remain available at close to its full value on short notice. A 30-year Treasury can provide an attractive long-term yield, but it also exposes me to price swings if I have to sell before maturity. For money I may need within a few years, that trade does not work for me.
The Extra Yield Is Real, but It Is Not Free Money
As of Aug. 25, the Treasury Department’s 30-year par yield was 5.17%, compared with 5.16% for the 20-year and 4.64% for the 10-year. Against my 3.80% savings APY, the current gap is 137 basis points. A basis point is simply one-hundredth of a percentage point, so 137 basis points equals 1.37 percentage points. On $25,000, that is roughly $343 of additional annualized yield before taxes.
There are two catches. First, the published Treasury yield is not necessarily the coupon a particular bond will pay in cash each year. Second, my savings rate can change, so I cannot assume today’s 1.37-point advantage will persist for the next decade. Treasury interest does have one tax advantage: it is subject to federal income tax but exempt from state and local income taxes. That can make the comparison more favorable for Treasury investors who live in states with an income tax.
Duration Is What Keeps Me From Chasing the Higher Rate
The number that matters to me is duration. A newly issued 30-year Treasury around today’s yield would have roughly 15 years of duration, although the exact figure depends on the bond’s coupon, price, and remaining maturity. In plain English, duration estimates how sensitive the bond’s market price is to changes in interest rates. A duration near 15 means a one-percentage-point rise in comparable yields could translate into roughly a 15% price decline as a first approximation.
On $25,000, 15% is about $3,750. That estimate is not exact, because bond prices do not move in a perfectly straight line with rates, but it puts the tradeoff in perspective. The current yield advantage over my savings account is about $343 a year. A roughly $3,750 paper loss would equal almost 11 years of that current annual advantage, not four. If I can hold the bond until maturity, those interim price movements matter much less. But I may need this money long before 2056.
Treasuries Are Liquid, but That Does Not Mean the Price Is Stable
The risk here is not that I would be unable to sell a Treasury. The Treasury market is highly tradable. The issue is what price I would get if I needed the money at the wrong time. The SEC specifically warns that fixed-rate bond prices generally fall when market interest rates rise, including the prices of U.S. Treasury securities sold before maturity.
Recent rates show how much the long end can move even over short periods. The 30-year Treasury par yield ranged from 5.17% to 5.31% between Aug. 5 and Aug. 25. The 10-year reached 4.75% on July 31 and stood at 4.64% on Aug. 25. None of that means a full one-percentage-point jump is around the corner, and I would not pretend to know where long-term rates go next. It simply reinforces the point: a 30-year bond has considerably more price sensitivity than cash sitting in a savings account.
A 30-Year Treasury Can Still Be the Right Investment
Someone investing money they genuinely will not need for decades has a different decision to make. Treasury bonds pay fixed interest every six months, and the face value is repaid at maturity. That can make long-dated Treasuries useful for matching future expenses or building part of a retirement-income plan. Falling rates could also push the bond’s market value higher, just as rising rates can push it lower.
That is different from emergency savings or money earmarked for expenses over the next few years. If my savings account is at an FDIC-insured bank and my deposits remain within the applicable insurance limits, I get something I value more for this particular $25,000: access without having to worry about whether long-term bond prices happen to be down when I need the cash. The 3.80% APY can fall, so there is no guarantee I will keep earning it. I am simply matching the investment to the job the money needs to do. For this money, liquidity and price stability beat the higher headline yield.