Treasuries

Treasuries are debt securities issued by a national treasury or finance ministry to fund government operations and manage public debt. They are designed to be highly secure, reflecting the government’s credit and tax authority, and are widely traded in financial markets. In many countries, treasuries serve as the risk-free benchmark for pricing other bonds and as the basis for monetary policy transmission.

Common types include bills, notes, and bonds. Treasury bills are short-term securities with maturities of up to one year that are sold at a discount to par and do not pay periodic interest. Treasury notes have intermediate maturities (typically two to ten years) and pay semiannual coupons. Treasury bonds are longer-term instruments, usually with maturities of ten to thirty years, also paying semiannual coupons. Inflation-linked Treasuries, such as Treasury Inflation-Protected Securities (TIPS) in the United States, adjust the principal based on inflation so that the interest payments and redemption value reflect price changes. Some markets also issue floating-rate notes whose coupon resets with a reference interest rate.

Issuance usually occurs through regular auctions conducted by the treasury, with bids from financial institutions and other investors. Securities then trade in the secondary market, where prices and yields fluctuate with interest-rate expectations, inflation, and demand for safe assets. Treasuries are considered low credit risk and are used by investors for capital preservation, liquidity, and as a foundation for risk management. They also function as an important tool for central banks in implementing monetary policy. While most discussion centers on the U.S. market, many countries operate similar sovereign-debt programs under their own treasuries or finance ministries.