Learn the basics of government securities

Securities are financial instruments that are used to raise money, most commonly in the form of stock or debt. An important type of these assets is government securities that offer investment opportunities in the form of debt securities like bonds. 

Government bonds are issued by sovereign governments to help finance public spending. Governments usually issue bonds in the country’s own currency. To attract foreign buyers concerned about currency risk, countries sometimes issue bonds in popular global currencies such as the US dollar or the euro.

Types of government securities

Sovereign governments tend to offer a wide variety of bonds to investors and we will take a closer look at what the US offers. US Treasury is the official name for the various forms of debts issued by the United States federal government. 

There are four major types:

  • Treasury bills, or T-bills, mature in one year or less; the shortest available maturity is four weeks.

  • T-notes are available in maturities of 2, 3, 5, 7 and 10 years, and have a coupon payment every six months.

  • T-bonds mature in 30 years and also come with semi-annual coupon payments.

  • Treasury Inflation-Protected Securities (TIPS) are bonds whose principal is periodically adjusted for inflation.

US Treasury securities are backed by the “full faith and credit” of the US government. This, coupled with a strong repayment record, make these assets among the safest investments anywhere.

Click here to learn how to buy treasury bonds.

Government securities in different countries have different names and available maturities. For example, UK government bonds are called gilts, and the local equivalent of TIPS are called index-linked gilts. German government bonds are collectively called Bunds, ranging from six-month Bubills through five-year Bobls to 10- or 30-year Bunds, among others.

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