Treasury Bonds

Treasury bonds are considered to be one of the more sound investments you can make because of the fact that they are issued by the federal government. The money which the government receives from investors is used for various government projects. The money that you pay for a treasury bond is basically a loan which you are giving to the government so they will be able to complete whatever projects they are currently working on. As the government repays the principal of the loan, they also add interest which is how you are able to profit from these bonds. You receive a fixed interest rate which is agreed upon when you purchase the treasury bonds and it is paid over a pre-determined length of time. The bonds which you purchase are backed by the full faith of the U.S government, meaning that you will not have to worry about not getting your money because of the fact that there is virtually no chance of them going under like a corporation. These bonds are certainly considered to be one of the more low risk investments you can make and it is a good idea to look into them if you want a nice return with little risk involved.

One of the other great things about these bonds is the fact that they are completely exempt from state taxes. You will still have to pay federal taxes on the interest which accumulates on the money which is paid back to you by the U.S government though. The government typically sells these bonds by way of action in the primary market, although you will also be able to get them through a broker in the secondary market. It is important to remember that if you do choose to go this route when buying treasury bonds, you will have to pay a certain fee for the transaction. The government however does not charge any type of fees in these auctions so you will be able to save money towards your investment.

You will find that treasury bonds are “marketable securities”, which means that you will be able to trade them after you make the initial purchase. One of the reasons that they are considered to be highly liquid is because of the booming secondary market which makes them even more valuable. Interest rates typically determine how much they cost either at auction or on the secondary market. Because the treasury bonds you will be able to buy today are not callable, interest will continue to accumulate until the day the bond matures. One of the downsides you will want to consider with treasury bonds is that if interest rates happen to go up during the duration of the loan you give to the government, the amount of interest you are paid could be less compared to what you could be getting with another type of investment. Before you make a final decision as to whether or not you would like to invest in these, you should take the time to think about the risks involved as well as how you want to send your money.

Something else that you will want to consider is that if the interest rates happen to go up during the period of the loan you give the government, the resale value of your bonds will also go down. When inflation starts to rise, it can become a problem for the amount of interest which is earned on your treasury bonds, something that you will definitely want to consider before making a decision as to whether or not you want to invest in them. One general rule of investing is that the more risk you take the bigger the return, so because the risk of the government defaulting is very low, the return is not as large as you might get from the stock market or some other investment.

Treasury bonds have the longest maturity length of any bond which is used by the U.S government, specifically the Treasury Department. They can last anywhere from ten to thirty years and the ones which are closer to thirty are referred to as “long bonds” and they come in denominations of $1,000 all the way up to $1 million. It will be crucial for you to examine this investment closely before you decide to make it, because while there is little risk involved, there is the opportunity cost to factor in. By spending your money on treasury bonds, you could be missing opportunities elsewhere which might be more lucrative for you in the short or long term.

Comments are closed.