Bonds: The Unbeaten Path to Secure Investment Growth

Chapter 6. U.S. TREASURY SECURITIES

THIS CHAPTER DESCRIBES marketable bonds and other securities issued by the U.S. Department of the Treasury. Popularly known as Treasuries, these securities are all backed by the full faith and credit of the U.S. government. With the United States rise to world economic dominance, such backing represents the strongest safety guarantee available. Accordingly, these securities have less default, event, liquidity, and political risk than any other investment. That backing does not mean that they're without risk. Longer-term Treasuries still have substantial market risk.

The Big Picture

Marketable securities, as the name implies, can be sold to other individuals or entities. Thus, if you buy a 5-year Treasury note on a Monday morning, you can sell it that Monday afternoon. However, you can never have physical possession of a marketable Treasury bill, note, or bond. In other words, you never receive a certificate from the government with your name on it. Rather, all Treasuries are available in what is known as book-entry form. These entries, with your name, are recorded in the books (or, in today's more modern terms, the accounting records) of commercial firms, such as banks or brokerage houses or in the records of the U.S. government itself if you participate in the TreasuryDirect Program. However, you do receive a statement confirming your ownership of a Treasury.

Before 1985, the government issued 30-year Treasury bonds that it could call—that is, buy ...