The United States government is the world’s largest bond issuer. US government bonds are automatically considered to have a rating of AAA, if not higher. On every government bond it is printed:
“Backed by the full faith & credit of the U.S. government”
Even if these bonds will not default, they are not entirely risk free. Risks that accompany all bond investments, such as interest rate risk, inflation risk, and reinvestment risk, are present here as well.
Bonds issued by the United States Treasury are called Treasury Securities, or Treasuries.
All treasuries are issued according to a format called Book-Entry. Physical documents are not printed, but rather they are listed electronically in a computer system that brokers and banks can access.
Treasuries are issued according to an auction system, which will be explained later.
Sorting Government Bonds
Government bonds are generally sorted into three categories according to the time it takes their time to maturity.
|Time to Maturity
|Less than one year
|Between one and ten years
|More than ten years