What are U.S. Government Bonds?
US Government Bonds are debt securities that provide an opportunity to invest in the federal government as it raises capital for spending big and small. Most bonds are issued by the Department of the Treasury at fixed interest rates and carry a significantly lower risk than similar corporate bonds.
A US Government Bond (also known as a ‘Treasury Bond’) is an opportunity to make a low-risk loan to the federal government. Bonds are used to fund government expenditures, such as infrastructure projects, employees' salaries, military contracts, public health initiatives, among other projects. From the bond holder’s point of view, a US treasury bond is essentially risk-free. The principal of the “loan” and the interest are essentially guaranteed, so long as the US government does not default on its debt — a highly unlikely scenario.
A U.S. government bond is issued by the U.S. Department of Treasury. A Treasury bond (or T-Bond) is one example. Purchasing a T-Bond is generally designed to be a long-term investment — They mature in 10 to 30 years. Once purchased, the bond holder receives income in the form of a fixed interest rate (or coupon) every six months. When the bond matures, the investor receives the full amount of the face value of the bond. In the interim, the investor may sell the bond in the secondary financial market, where these bonds are openly traded.
A U.S. government bond is kind of like lending $20 to your parents when they forgot their wallet...
You’re not going to get rich, but — unless they go bankrupt — you’ll get your money back.
Treasury Bonds (or T-Bonds) are a kind of U.S. government bond. They are not the only financial securities issued by the government. Treasury Notes and Treasury Inflation-Protected Securities are two other common bonds issued by the government.
No. Your ability to purchase US government bonds may be affected by your home government's laws and regulations, but generally, non-US citizens are allowed to buy US government bonds. You will need either a Social Security number or an Individual Taxpayer Identification Number. Similarly, U.S. citizens can also typically invest in government bonds from other countries.
Generally speaking, US government bonds are quite safe, since the risk of the United States defaulting on its debt is quite low. Bonds issued by the US government are generally deemed some of the world’s safest.
Yes, you can. But if you do sell your bonds before they mature, you stand to lose the guarantee of getting paid interest on the face value of the bond. The process is pretty straightforward, but what you will get in return is what another buyer is willing to pay for your bond. This may be more or less than what you originally paid, or what you would have received at maturity.
Irrespective of whether you’re in the US or another country, an international bond is described as one issued in a country or currency that is not the investor’s.
What are some examples of international bonds?
If you’re a resident of the United States, an international bond is one that is issued by corporations or governments in other countries and/or in a currency other than the U.S. dollar. International bonds include Eurobonds, foreign bonds, and global bonds.
What is Earnest Money?
Earnest money is a deposit that a buyer puts down as a deposit to the seller at the time of entering into a contract for a large purchase, often used in the sale of a house.
What are Financial Statements?
Financial statements are a collection of reports that companies use to share important information about their financial situation.
What is the Dodd-Frank Act?
The Dodd-Frank Act is a federal law, passed in the wake of the 2008 financial crisis, intended to strengthen consumer protections and regulation of financial markets.
What is a Ponzi Scheme?
A Ponzi scheme is a type of investment fraud that promises investors a high rate of return without actually collecting legitimate earnings.
What is a Prospectus?
A prospectus is a document a company releases when it's issuing a new security (stock, bond, or mutual fund), which tells potential investors about the investment.