Treasuries

US Treasuries: A Guide to Investing in Bills, Notes, and Bonds

Welcome to the "Treasuries" page! Here, we'll provide an in-depth explanation of what treasuries are, the different types available, why they are considered safe, and the benefits of investing in them.


Treasuries, also known as U.S. Treasury securities, are a type of debt issued by the United States government. They are considered to be one of the safest investments available because the U.S. government backs them with its full faith and credit, making them virtually risk-free.


There are three types of treasuries: bills, notes, and bonds. Each type has a different maturity date, and the length of the maturity date determines the interest rate that investors can earn.


Treasury bills, also known as T-bills, have the shortest maturity date, ranging from a few days to one year. They are sold at a discount to their face value and do not pay interest until maturity. For example, an investor may purchase a $1,000 T-bill for $950 that matures in 90 days. When the T-bill reaches maturity, the investor receives the full face value of $1,000, earning $50 in interest.


Treasury notes have a maturity date ranging from two to ten years and pay interest twice a year. The interest rate on notes is typically higher than T-bills due to the longer maturity date.


Treasury bonds have the longest maturity date, ranging from ten to thirty years, and also pay interest twice a year. Bonds typically have a higher interest rate than notes due to the longer maturity date.


Investing in treasuries is considered safer than other forms of investments, such as stocks or corporate bonds, due to the U.S. government's backing. The U.S. government is considered a highly creditworthy borrower, and it is rare for it to default on its debt. As a result, treasuries are often used as a benchmark for other investments.


One of the benefits of investing in treasuries is the liquidity they offer. They can easily be bought and sold on the secondary market, allowing investors to cash in their investment if needed. This is in contrast to other investments, such as real estate, that can be difficult to sell quickly.


Another benefit of investing in treasuries is the low risk of inflation. While inflation can erode the purchasing power of investments, the U.S. government typically adjusts the interest rates on treasuries to keep up with inflation.


Finally, it's worth noting that keeping money in a treasury is safer than keeping it in a bank account. While banks are insured by the FDIC, the amount of insurance is limited, and there is still some risk involved. On the other hand, treasuries are backed by the full faith and credit of the U.S. government, making them virtually risk-free.


In conclusion, treasuries are a safe investment option that offer low risk, high liquidity, and protection against inflation. With their different types and varying maturity dates, treasuries can fit into a diversified investment portfolio and provide a stable source of income for investors.

The video below, produced by TD Ameritrade, is a great way to get a beginners level understanding of what Government Bonds are, and how they operate.