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For investors looking for safety, predictability, and liquidity, Treasury securities are the answer. When you buy a Treasury bond, you are lending money to the federal government for a specified period of time. Securities issued by the U.S. government are considered the safest of all investments because these debt obligations are backed by the "full faith and credit" of the U.S. government and its ability to raise tax revenues and print currency. They are viewed as having no "credit risk," meaning that it is virtually certain your interest and principal will be paid on time. Because of this unique degree of safety, interest rates are generally lower than for other widely traded debt, such as corporate bonds. According to data from Ibbotson Associates, over the past 80 years, intermediate-term government bonds averaged an annual rate of return of 5.4%. U.S. government securities are often called Treasuries because they are sold by the Treasury Department. Treasuries come in a variety of different "maturities," or lengths of time until maturity. Federal government bonds are never called or redeemed early. Treasury Securities currently offered:
Various types of Treasuries include Treasury notes, Treasury bills, Treasury bonds, and inflation-indexed notes. These all vary based on maturity and amount of interest paid. The Treasury Department also sells savings bonds as well as other types of debt through the Bureau of the Public Debt . Treasuries are guaranteed by the U.S. government and are free of state and local taxes on the interest they pay. In October 2001, the Treasury Department stopped issuing 30-year, fixed-principal Treasury bonds, sometimes called T-Bonds. Nonetheless, many are still unredeemed and earning interest, with a significant number of years remaining until maturity (see Treasury Direct for more information). These Treasury bonds earn and pay a fixed rate of interest every six months until they mature. Bonds are a long-term investment, maturing in up to 30 years. Treasury securities represent the most liquid capital investment in the world. The amount of marketable U.S. Treasury exceeded $4 trillion in outstanding bills, notes and bonds in 2005. The Treasury market is the most liquid debt market, meaning it is the one where pricing and trading is more efficient. You can buy or sell Treasuries through an investment professional, a commercial bank or an on-line broker or you can even buy new issues directly from the government at auction ( Treasury Direct ). Or you may choose to invest in a mutual fund that holds only U.S. Treasuries or a fund that holds other fixed-income securities or derivatives along with Treasuries.
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Treasury Bond
