20 Investments: Treasuries
  1. 20 Investments: Introduction
  2. 20 Investments: American Depository Receipt (ADR)
  3. 20 Investments: Annuity
  4. 20 Investments: Closed-End Investment Fund
  5. 20 Investments: Collectibles
  6. 20 Investments: Common Stock
  7. 20 Investments: Convertible Security
  8. 20 Investments: Corporate Bond
  9. 20 Investments: Futures Contract
  10. 20 Investments: Life Insurance
  11. 20 Investments: The Money Market
  12. 20 Investments: Mortgage-Backed Securities
  13. 20 Investments: Municipal Bonds
  14. 20 Investments: Mutual Funds
  15. 20 Investments: Options (Stocks)
  16. 20 Investments: Preferred Stock
  17. 20 Investments: Real Estate & Property
  18. 20 Investments: Real Estate Investment Trusts (REITs)
  19. 20 Investments: Treasuries
  20. 20 Investments: Unit Investment Trusts (UITs)
  21. 20 Investments: Zero-Coupon Securities
  22. 20 Investments: Conclusion

20 Investments: Treasuries

What Is It?
Also known as "government securities", treasuries are a debt obligation of a national government. Because they are backed by the credit and taxing power of a country, they are regarded as having little or no risk of default.

Treasuries include short-term Treasury bills (T-bills), medium-term Treasury notes and long-term Treasury bonds (T-bonds). One major advantage of treasuries is that they are exempt from state and municipal taxes - this is especially important in states with high income tax rates.

Treasury Bills - A U.S. government debt security with a maturity of less than one year. T-bills do not pay a fixed interest rate. They are issued through a competitive bidding process at a discount from par.

Treasury Notes - A marketable, fixed-interest rate U.S. government debt security with a maturity between one and 10 years.

Treasury Bonds - A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds are usually issued with a minimum denomination of $1,000.

Objectives and Risks
Treasuries are mainly used as safe havens for investors, especially when the markets head south. The fact that these debt instruments offer very little risk of default means the interest rate investors receive is relatively low. The price of treasuries rises as interest rates fall, and the opposite is true when interest rates rise. Therefore, the best time to buy treasuries is when interest rates are relatively high.

How To Buy or Sell It
Treasuries can be bought through various discount and full service brokers. Bond brokers also allow you to buy and sell treasuries. Perhaps the best way for individuals to buy or sell treasuries is through the U.S. Treasury's "Treasury Direct" program, which provides transactions for little or no fees.




Strengths

  • Treasuries are considered to be almost risk free.
  • Their low risk makes it fairly easy to borrow against the bonds.
  • The U.S. treasury market is among the most active in the world, thus lack of liquidity is not a concern.

  • Weaknesses
  • Compared to other debt instruments, rates of return for treasuries are not that great.

  • Three Main Uses
  • Provides Income
  • Liquidity
  • Tax Exemption
  • 20 Investments: Unit Investment Trusts (UITs)

    1. 20 Investments: Introduction
    2. 20 Investments: American Depository Receipt (ADR)
    3. 20 Investments: Annuity
    4. 20 Investments: Closed-End Investment Fund
    5. 20 Investments: Collectibles
    6. 20 Investments: Common Stock
    7. 20 Investments: Convertible Security
    8. 20 Investments: Corporate Bond
    9. 20 Investments: Futures Contract
    10. 20 Investments: Life Insurance
    11. 20 Investments: The Money Market
    12. 20 Investments: Mortgage-Backed Securities
    13. 20 Investments: Municipal Bonds
    14. 20 Investments: Mutual Funds
    15. 20 Investments: Options (Stocks)
    16. 20 Investments: Preferred Stock
    17. 20 Investments: Real Estate & Property
    18. 20 Investments: Real Estate Investment Trusts (REITs)
    19. 20 Investments: Treasuries
    20. 20 Investments: Unit Investment Trusts (UITs)
    21. 20 Investments: Zero-Coupon Securities
    22. 20 Investments: Conclusion
    RELATED TERMS
    1. Treasury Yield

      The return on investment, expressed as a percentage, on the debt ...
    2. 30-Year Treasury

      A U.S. Treasury debt obligation that has a maturity of 30 years. ...
    3. Treasury Direct

      The online market where investors can purchase federal government ...
    4. 10-Year Treasury Note

      A debt obligation issued by the United States government that ...
    5. Treasury Stock (Treasury Shares)

      The portion of shares that a company keeps in their own treasury. ...
    6. Spot Rate Treasury Curve

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    RELATED FAQS
    1. Why are treasury bond yields important to investors of other securities?

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    2. When are treasury bills best to use in a portfolio?

      Understand the role that U.S. Treasury bills can play in an investment portfolio and why they represent one of the most liquid ... Read Answer >>
    3. Which economic factors impact treasury yields?

      Discover the economic factors that impact Treasury yields. Treasury yields are the benchmark yield for the rest of the world, ... Read Answer >>
    4. How are treasury bills taxed?

      Read about how the Internal Revenue Service collects taxes on treasury bills purchased from the United States government ... Read Answer >>
    5. What is the difference between the Daily Treasury Long-Term Rates and the Daily Treasury ...

      Find out more about the daily Treasury long-term rates, daily Treasury yield curve rates and the difference between these ... Read Answer >>
    6. What are the maturity terms for Treasury bonds?

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