Treasury Securities

Treasury securities are the debt of the United States federal government, issued by the Treasury Department to finance deficits. They come in maturities from a few weeks to thirty years and are conventionally treated as the benchmark "risk-free" asset in dollar finance, which makes their yields the reference point for pricing nearly everything else.

Key takeaways

Bills mature in one year or less and are sold at a discount; notes run 2 to 10 years and bonds 20 to 30 years, both paying semi-annual coupons.
TIPS (Treasury Inflation-Protected Securities) adjust principal with consumer prices.
Treasury yields serve as the base rate for mortgages, corporate bonds and valuation models worldwide.
"Risk-free" refers to credit risk; Treasuries still carry interest-rate and inflation risk.

The instruments

Treasury bills carry no coupon: buyers pay less than face value and receive face value at maturity, the difference being the interest. Notes and bonds pay fixed coupons twice a year, like other bonds. TIPS link their principal to the Consumer Price Index, so coupon payments and redemption value rise with measured inflation. Savings bonds (Series EE and I) are a separate, non-tradable retail product.

Why Treasury yields matter everywhere

The market is among the deepest and most liquid in the world, with trillions outstanding and continuous trading. Because default risk is considered minimal, the Treasury yield curve, the line connecting yields across maturities, functions as the dollar economy's pricing backbone: corporate borrowers pay Treasury yields plus a credit spread, and discount rates in valuation models start from Treasury rates. The curve's shape is watched as an economic signal; inversions have preceded most U.S. recessions.

How they are bought and held

Treasuries are sold at regular auctions to dealers, institutions and the public (directly via TreasuryDirect in the U.S.), and trade actively in secondary markets. Foreign central banks hold large amounts as reserves, and the Federal Reserve holds them as the main asset behind its monetary operations.

Frequently asked questions

Are Treasuries completely safe?

They carry minimal credit risk by convention, but their market prices fall when interest rates rise, and inflation can erode the real value of the fixed payments. Safety has a specific, narrow meaning here.

What is the difference between yield and coupon?

The coupon is the fixed interest written into the security. The yield is the return at the current market price, which moves constantly as prices change; see yield.