Holding to maturity can avoid a sale at a depressed market price. It does not make purchase price, face value, and the investment's total return the same thing.
Holding a U.S. Treasury to maturity lets you avoid selling at a depressed market price. It does not mean the maturity payment must equal what you paid. Face value, purchase price, and the interest received along the way are different parts of the investment.
This explanation concerns conventional fixed-rate Treasuries paid in dollars. Inflation-protected securities such as TIPS have a different principal structure.
Face value is the repayment amount
The Treasury repays a bond's face value at maturity. Your purchase price may be above, below, or equal to that amount. TreasuryDirect explains that the price depends on the bond's interest terms and its yield to maturity.
If you buy above face value, the final principal payment alone will be less than the purchase price. That is not automatically a loss on the whole investment: coupon payments may offset the difference. Total profit or loss includes the interest and repayment, less the amount paid and applicable costs and taxes. The coupon rate alone does not describe the return on your purchase price.
A lower account value does not rewrite the bond
When market interest rates rise, existing fixed-rate bond prices generally fall. Their fixed coupons are less attractive relative to newly available yields.
A broker may therefore show a loss while you still hold a Treasury. That market quotation does not reduce its contractual coupon or face value. If you can hold the security through maturity, you need not accept today's selling price.
But a sale before maturity uses the market price available then. If you need the cash early, proceeds can fall short of your purchase price, even after allowing for interest already received.
| Question | Relevant amount |
|---|---|
| What could I receive by selling now? | The available market sale price |
| What is repaid at maturity? | The Treasury's face value |
| What is my overall profit or loss? | Interest plus sale or repayment proceeds, less purchase outlay and costs |
Dollars returned and purchasing power are different
Even a positive dollar return may fail to keep up with inflation. Receiving the promised dollars does not guarantee that they buy as much as the money originally invested.
Currency also matters when an investor measures the result outside dollars. Without a currency hedge, a weaker dollar can turn a positive dollar result into a loss in the investor's home currency. That conversion is a separate issue from whether the Treasury paid on time.
A Treasury ETF is not one maturing Treasury
A conventional Treasury ETF holds a portfolio and replaces securities as part of its strategy. Its underlying bonds have maturity dates; the ETF generally does not promise to repay your ETF purchase price on one of those dates.
Holding such a fund for a long time is therefore different from waiting for the face-value payment on a specific Treasury. The security's payment schedule and the fund's portfolio rules describe different commitments.
See TreasuryDirect on prices and interest, the SEC's fixed-rate bond bulletin, and FINRA's explanation of bond funds.