Treasury Bond vs. Certificate of Deposit

Treasury bonds and certificates of deposit are two ways to increase earnings and diversify your investment portfolio. Each type of investment requires the purchaser to loan money to the issuer for a specified period of time. In return, the investor receives interest on the held funds. While it would seem on the surface these two investment options are similar, comparing the two will help you understand which one will work for your investment purposes.

How CDs Work

An investor purchases a CD by depositing a certain amount of money into an account and agrees to keep that money there for a fixed period of time. In return, the institution offering the CD agrees to pay the investor interest at a fixed or variable rate. If the investor redeems or withdraws the money before the maturity date, he forfeits a portion of the interest already earned and may be charged an additional early withdrawal fee. If the investor redeems the CD at maturity, he is paid its face value plus the interest. Some banks sell CDs with a callable feature, which means the bank can terminate the CD before the maturity rate. The bank still pays interest due and the face value of the CD; however, the investor does not receive the full interest he would have accrued if the CD was held to the maturity date.

How Treasury Bonds Work

Treasury bonds are sold in increments of $100, and the purchaser is paid interest on the bond every six months. At maturity, the investor may redeem the bond for its face value. The initial purchase price and yield, or interest rate, of a Treasury bond are set through an auction process. Bonds are purchased using one of two types of bids: non-competitive or competitive. Non-competitive bids are used by investors willing to accept the interest rate determined during the auction process. Investors wanting to specify the interest rate they are willing to accept use a competitive bid. Investors place competitive bids through their broker or bank. Non-competitive bids can be made through the TreasuryDirect website or through a broker or bank.

Length of Maturity

Treasury bonds mature 30 years from the date of purchase. On the other hand, CD maturity rates vary anywhere from one day to weeks, months or years. Some institutions may offer CDs with maturity periods of more than 10 years, but most don't venture maturity dates beyond 10 years. Investing in Treasury bonds ties up funds for a longer period of time than investing in a CD. Some people may prefer investing in a CD, because funds are far more liquid than a Treasury bond. Others may like investing in bonds, because the investment does not have to be managed as often.


The minimum purchase for a Treasury bond is a single, $100 bond. The minimum purchase requirements for CDs varies according to the issuer's stated terms. Minimums generally start at $1,000 and can go as high as $10,000. CDs are issued by banks, credit unions and other financial institutions and are sold for fixed periods of time, such as 6 months, one year or five years. Treasury bonds are originally issued during the months of February, May, August and November and can be purchased through a bank, a broker or online through TreasuryDirect.


CDs are insured by the Federal Deposit Insurance Corporation for up to $250,000 per account holder. This means you are protected should your credit union or bank fail, as long as the balance of your account stays at $250,000 or less. On the other hand, Treasury bonds are not insured. However, according to the FDIC, even though Treasury bonds are not insured, the bonds are still protected. Because the Treasury bond is a registered security, when it is held in an account managed by an FDIC-insured bank, the bonds are protected. In addition, registered securities can be traced and reissued to the investor if they are lost or stolen.