What exactly are US bonds? How do I invest?

Recently, rising yields on US bonds have become a big topic of conversation. In particular, the news that US 10-year bond yields temporarily exceeded 5% on October 23 brought great turmoil to the market. But what do US bonds actually look like? This time, I will briefly tell you the basics of US bonds.

US bonds are bonds issued by the American government. This is a security that promises to be repaid to our investors with interest rates in the future when the government borrows funds. In general, it is unlikely that the US government's finances will go bankrupt, so it is regarded as a low-risk, safe asset, and has garnered the trust of investors around the world.

As yields on US bonds rise, the price of existing bonds falls. Because new bonds offer higher interest, existing bonds (lower interest) lose their appeal. Conversely, if yields fall, prices will rise.

In addition to having a high circulation volume, US bonds also have a strong influence on the market, and they are also a standard for deciding loan and deposit interest rates and corporate bond issuance conditions for banks within the United States. Interest rates are directly related to the investment momentum of companies and investors and the level of mortgages. Currently, exchange rates such as the dollar and yen are also affected. Yield movements on US bonds are a very important indicator for the economy as a whole, including overseas countries such as Japan.

Actually, for those who want to invest in US bonds, there is a way to invest through ETFs that incorporate US bonds such as TLT, TMF, and TMV. For individual investors in Japan, there is an advantage that ETFs related to US bonds can be easily bought and sold rather than US bonds themselves.

I'll explain ETFs using examples.”TLT (iShares US Treasury over 20 years ETF)“It's an ETF that collects US bonds with a very long term. Now that yields are rising, the value of “TLT” is also falling. Conversely, if yield falls, the value of “TLT” will increase.

In other words, the price of ETFs related to US bonds is linked to the yield of US bonds. If you are interested in ETFs related to US bonds, let's first check the yield movements of US bonds frequently!