Understanding Treasury Bonds, Notes and Bills
Government bonds are bonds issued by the U.S Government for the purpose of raising money from the public. The government is responsible for paying interest and principal on the dates stipulated according to the terms of the bond. Since the government is the issuer of the bonds, these bonds are considered to be risk-free. The assumption is that the government will always stand behind its obligations, and that an investor in these bonds consequently bears no risk.
U.S Government bonds are issued by the Treasury Department, and they are called Treasury Bonds, or Treasuries for short.
All government bonds are issued in a book-entry format. In this format, no physical notes are issued to represent the bonds. Instead, they are registered electronically in the computer systems of banks and brokers. Government bonds are issued through the tender method, which will be explained later.