Treasury Securities

• Treasury securities are debt securities issued by the U.S. Department of the Treasury. Treasuries come in different types, known as bills, notes and bonds. The whole range of Treasury debt is often referred to as Treasury bonds or just Treasuries. The U.S. government borrows the majority of the money it needs to operate by issuing Treasury securities. After issue, Treasury bonds trade on the secondary bond market, not the stock market.
  
  

Types of Treasury Securities

• As fixed income investments, Treasury securities pay a fixed rate of interest and the principal amount back to the investor when the security matures. Treasury bills are the shortest term Treasuries and mature in one year or less. Treasury notes are intermediate term debt with maturities at issue of two to 10 years. Treasury bonds are the longest term Treasury, with a maturity of 30 years when issued. The Treasury also sells TIPS bonds. TIPS stands for Treasury Inflation Protected Securities. The principal value of TIPS bonds adjusts for inflation, protecting the principal value. For example, if a TIPS bond starts with a $10,000 face value, after 2 percent of inflation the bond value would be $10,200. As the bond value increases, the interest paid will increase based on the higher value.
  
  

Importance of Treasuries

• Treasury securities are considered to be the safest investment option. Treasury debt is backed by the full taxing power of the U.S. government. Treasury interest rates are used as benchmark rates for debt securities from other issuers and at the different maturity ranges. Treasury prices are affected by changing interest rates. Rising rates will result in falling bond prices, and falling interest rates cause bond market prices to increase. The secondary market for Treasuries is the largest debt market in the world.
  
  

Treasuries in the Stock Market

• Treasury securities and the stock market intersect in the form of exchange trade funds, or ETFs. Shares of an ETF trade on the stock market and are available with portfolios holding a wide range of investment types, including Treasury securities. The Index Universe database lists 54 ETFs tracking Treasury security values in one way or another. Using Treasury-focused ETFs is one way to trade changing interest rates or earn an income from Treasury securities.