What are U.S. Treasuries?
U.S. Treasuries, also known as U.S. Treasury securities or simply Treasuries, are debt instruments issued by the U.S. Department of the Treasury to fund the operations and financial obligations of the U.S. government. They are considered to be among the safest investments available in the financial markets.
There are several types of U.S. Treasuries, including:
Treasury Bills (T-Bills): T-Bills have a maturity of one year or less. They are sold at a discount to their face value and do not pay periodic interest. Instead, investors earn interest by buying the bills at a discount and receiving the full face value at maturity.
Treasury Notes: Treasury Notes have maturities ranging from two to ten years. They pay semi-annual interest to investors based on a fixed coupon rate.
Treasury Bonds: Treasury Bonds have maturities ranging from ten to thirty years. Like Treasury Notes, they pay semi-annual interest based on a fixed coupon rate.
Treasury Inflation-Protected Securities (TIPS): TIPS are designed to protect against inflation. They are indexed to the Consumer Price Index (CPI) and their principal value adjusts with inflation. TIPS pay interest semi-annually and the adjusted principal is paid at maturity.
U.S. Treasuries are considered to have low default risk due to the backing of the U.S. government. They are often used as a benchmark for other interest rates and are considered a safe haven investment during times of market uncertainty.
Treasuries are actively traded in the financial markets and are widely held by investors, including individuals, institutional investors, and foreign governments. They provide a means for the U.S. government to borrow money from investors to finance its spending needs and manage its fiscal policies.