Treasury Securities
Treasury securities are debt issued by the US government to finance its spending, including Treasury bills, notes, bonds and inflation-protected TIPS.
Treasuries are backed by the full faith and credit of the United States and are widely treated as the benchmark for low credit risk. They come in several forms. Treasury bills (T-bills) mature in one year or less and are sold at a discount. Treasury notes mature in 2 to 10 years and pay semiannual interest. Treasury bonds mature in 20 or 30 years. TIPS adjust their principal for inflation.
Treasuries are sold at auctions and then trade actively in one of the world's largest and most liquid markets. Investors can buy them through TreasuryDirect, a brokerage account or bond funds. Interest is subject to federal income tax but exempt from state and local income taxes.
Treasury yields influence borrowing costs across the economy, and the 10-year note is closely watched. While default risk is considered very low, Treasury prices still fall when interest rates rise, so long-term Treasuries can lose value before maturity.
Example: a 13-week T-bill bought for $990 and redeemed at $1,000 earns $10 of interest.