U.S. Treasury Securities
1. Treasury Debt
To help finance its operations, the U.S. government from time to time borrows money by selling investors a variety of debt securities known collectively as Treasury securities or, more simply, Treasuries. These securities have a special place in the investment world, since they are the benchmark by which most other debt securities are measured.
When you invest in a debt security—also known as a fixed-income investment, or more generally, as a bond—you lend money to an entity that promises to pay back the loan at the end of a predetermined period called the term. For example, in the case of Treasuries, you lend money to the U.S. Treasury. The amount of the loan, the principal, is also called the security’s face value or par value. The Treasury pays you interest for the use of your money throughout the term of the debt security, typically twice a year. When the principal is completely paid back, the security is said to have matured. The date on which that happens is called the maturity date.
The interest rate, stated as a percentage of par value, is sometimes called the coupon, from days past when you had to tear a paper coupon off the bond certificate and present it to a bank or other agent to receive your interest payment. Today certificates have been replaced with an electronic book-entry recordkeeping system, and interest is credited electronically to your account.
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