Treasuries: The Safe Road
Apr 3, 2023
Treasuries are widely regarded as one of the safest investments, particularly for conservative investors. Essentially IOUs from the U.S. government, these securities come in the form of bonds with varying maturities, ranging from a few days to as long as 30 years. By issuing treasuries, the government borrows money to finance its expenses and promises to pay back the borrowed capital with interest on a predetermined date.
The most important aspect of treasuries is that the U.S. government unconditionally guarantees repayment of the principal and interest when the securities mature. As a result, treasuries are considered to have the highest credit quality, backed by the full faith and credit of the federal government.
Treasury securities are divided into three primary categories and are based on the length of time until maturity: T-Bills (4 - 52 weeks), T-Notes (2 - 10 years), and T-Bonds (10 - 30 years). As the time until maturity increases, the interest rate paid increases as well; for example, T-Bonds earn more interest than T-Bills.
In the world of investing, treasuries are considered the gold standard for safety. In a rising rate environment like we are seeing today, investors can earn 4% or more without taking on undue risk - not too bad in our eyes.
Cash Management
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