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.
You can buy a government bond issued by the United States Treasury through the department’s website, TreasuryDirect.gov. Or you can use a brokerage firm.
Alternately, as with other classes of assets, you can use a mutual fund or exchange-traded funds (ETFs) to invest in bonds.
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 a General Ledger?
A general ledger is an accounting tool that companies use to track and summarize transactions — including purchases and sales — and to track accounts like cash, accounts receivable, and inventory.
What is the Gold Standard?
The gold standard refers to an economy where paper money and coins are equal to a set amount of gold and can be exchanged for that amount at any time.
What is Short Selling?
Short selling is an advanced trading strategy where you borrow shares of a stock, sell them at the current price, and hope the price falls so that you can repay the borrowed shares at a lower price.
What are Capital Gains?
A capital gain is the amount an asset increases in price from when you buy it to when you sell it.
What is Scarcity?
Scarcity is the limited availability of a resource in relation to the want and need for that resource.