US Treasury Bonds
US Treasury Bonds
US Treasury bonds are government bonds issued by the United States Department of the Treasury with an interest rate designed to help stabilize the economy and provide financial stability in the United States. Treasury bonds are most commonly known simply as Treasuries. They are issued from each federal government agency and are listed on U.S. Treasuries Notes. The notes most commonly held are Federal Pre-Offer, or Federal bonds, which are backed by actual physical bonds that were previously issued (at time of issue), or Federal Reserve Notes, which are backed by the currency of the United States and are not backed by actual physical bonds. The amount and timing of these notes are related to the overall health of the American economy.
The interest rates on the Treasuries are determined by a number of factors. These factors include the primary agency, the discount rate, the secondary market, the credit quality of the underlying collateral, and the risk of inflation. The discount rate is the rate applied to the face value of the bond and is based on a published schedule. In the secondary market, dealers buy and sell Treasuries based on their estimates of the primary agency’s discount rate. Interest on the Treasuries is regularly paid semi-annually in March, April, June, and September.
One of the most important considerations when buying or selling US treasury bonds is determining the current discount rate. The discount rate tells you how much interest will be paid to the holder monthly over the life of the bond. A low discount rate means that the principal will be paid less interest over time. Conversely, a high discount rate will mean that the principal will be paid more interest over time. This is a primary rate that most investors base their investments on.