U.S. Treasury Securities

United States Marketable Treasury Securities, are issued by the U.S. Department of the Treasury to fund its operations and meet financial obligations. These securities are regarded as some of the safest investment options globally, backed by the full faith and credit of the U.S. government.

Outline

In this section, we introduce U.S. Treasury securities, their risks and pricing, and the term structure of interest rates, i.e., how interest rates vary over time:

• Treasury Bills, Notes and Bonds are fixed-income securities issued by the U.S. government to fund its operations and meet financial obligations. Treasury bills have a short-term maturity of less than a year, while Treasury notes and bonds have maturities ranging from two to thirty years. These securities are regarded as some of the safest investment options globally, a defacto risk-free asset.

• Treasury Security Pricing Dynamics and Risks are utilized to determine the equitable value of a bond, considering its maturity, coupon rate, and current market interest rates. As per Malkiel’s guidelines, the bond’s price will fluctuate inversely with changes in interest rates. Long-term bonds will be more affected than short-term bonds.

• STRIPS Bonds and the Term Structure of Interest Rates describes the relationship between fixed-income security interest rates and their maturity period. This concept represents the market’s outlook on future interest rates. The shape of the term structure - whether it’s upward-sloping, flat, or inverted - offers valuable insights into the economy’s present and potential future state.