Who is the U. S Treasury?
The U.S. Treasury is responsible for controlling the United States finances and manage the incoming revenues. The Treasury department was established in 1789. When you purchase a T-bill or T-Bond you are actually lending money the the United states government which they use in their daily operations.
Main Rolls of the Treasury Department:
- Managing Federal finances and revenues
- Collecting taxes and paying the United States Bills
- Managing currency and coinage
- They are the accountants of the government
- Supervising national banks and thrift institutions
- Enforcing Federal finance and tax laws
What is a Treasury Bill?
A treasury bill or (t-bill) is a short term loan the the treasury department. These bills are sold in increments of $1,000 like other bonds, but the maturity date is much sooner than most bonds.
What is a Treasury Bond?
This is a long term purchase than a t-bill. Before Clinton was in the white-house there were bonds of all different sizes ranging from 10 to 30 years. During this time there was a surplus of money. The federal government decided to purchase the 30 year bonds back off the market.
This changed a few things such as the benchmark that is used today. Since there arn’t any 30 year notes on the market anymore, we use the 10 year t-bond as the new index for interest rates. To see this index in real time visit finance.yahoo.com and look at the 10-Yr bond index.
Risk To Buying T-Bills
These are considered by investors to be the most secure bond you can invest in. In college courses, they call this the risk free rate of return because there is a small chance that the United states would ever default on their own bonds. Over the course of history, the ratings on T-Bills have always been AAA up until recently.
Over the course of history, the ratings on T-Bills have always been AAA up until recently. On April 6th, 2011 the US treasury bills were downgraded from AAA to AA which is something that has only happened once in history. This was a surprising event for booth traders and investors because the T-Bill has been the go to investment when they couldn’t think of anything else to buy.