What are treasuries?

Treasuries, also known as Treasury securities or government bonds, are debt instruments issued by the government of a country to finance its expenditures. In the United States, they are issued by the U.S. Department of the Treasury.

Treasuries are considered to be one of the safest investments available because they are backed by the full faith and credit of the government. They are widely regarded as risk-free investments, as the government is highly unlikely to default on its debt obligations.

There are several types of treasuries, including:

Treasury Bills (T-bills): These are short-term securities with maturities ranging from a few days to one year. They are typically sold at a discount to their face value and do not pay periodic interest. Instead, investors earn a return by receiving the full face value when the bill matures.

Treasury Notes (T-notes): These have longer maturities than T-bills, typically ranging from 2 to 10 years. They pay interest every six months at a fixed rate until maturity, at which point the investor receives the face value.

Treasury Bonds (T-bonds): These have the longest maturities, ranging from 10 to 30 years. Like T-notes, they pay interest every six months at a fixed rate. At maturity, the investor receives the face value of the bond.

Investors, including individuals, institutions, and foreign governments, buy treasuries as a way to preserve capital, generate income, and diversify their investment portfolios. They are also used as benchmark securities to determine interest rates for other types of debt, such as corporate bonds and mortgages.

Treasuries are actively traded in the financial markets, and their prices fluctuate based on supply and demand dynamics, changes in interest rates, and market conditions. The U.S. Treasury Department regularly auctions new issuances of treasuries to meet the government’s funding needs.