United States Treasury security

United States Treasury securities are debt obligations of the United States government designed to finance the national debt and other government spending activities. These securities are considered among the safest investments in the world because they are backed by the full faith and credit of the United States government. Treasury securities come in several forms, including Treasury bills (T-bills), Treasury notes (T-notes), Treasury bonds (T-bonds), and Treasury Inflation-Protected Securities (TIPS).

Types of Treasury Securities

Treasury Bills

Treasury bills are short-term securities that mature in one year or less from their issue date. They are sold at a discount from their face value, and the investor receives the face value upon maturity. The difference between the purchase price and the face value is the interest earned by the investor.

Treasury Notes

Treasury notes are medium-term securities that mature in two to ten years. They pay interest every six months and return the principal, or face value, when they mature.

Treasury Bonds

Treasury bonds are long-term securities that mature in twenty to thirty years. Like T-notes, they pay interest every six months and return the principal upon maturity.

Treasury Inflation-Protected Securities (TIPS)

Treasury Inflation-Protected Securities are Treasury securities that are indexed to inflation in order to protect investors from the negative effects of inflation. TIPS pay interest every six months and adjust the principal according to changes in the Consumer Price Index (CPI).

Purchasing Treasury Securities

Treasury securities can be purchased directly from the United States Department of the Treasury through the TreasuryDirect website or through a bank or broker. Investors can buy securities at auction or on the secondary market. The price and yield of Treasury securities are determined by market demand.

Benefits and Risks

Treasury securities are considered a safe investment because they are backed by the U.S. government. They offer a fixed interest rate and are exempt from state and local taxes. However, they are subject to federal income tax. The main risk associated with Treasury securities is interest rate risk; if interest rates rise, the value of existing bonds falls.

See Also

• Federal Reserve System
• Government debt
• Monetary policy
• Public finance

External Links

• TreasuryDirect