Treasury Interest Rates
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Market-based treasury bond rates make buying U.S. securities a safe and highly liquid investment choice for savers. Uncle Sam wants and needs Americans to buy U.S. savings bonds, T-bills and other government securities to help fund the country and reduce the national debt. In exchange, buyers can earn fixed and fluctuating interest. A the tune of two trillion dollars a year, the U.S. Treasury's Bureau of Public Debt borrows monies from the American public in exchange for interest-bearing government securities. Investors can purchase savings bonds and notes at auction through the U.S. Treasury and Bureau of Public Debt websites. In essence, when Americans buy savings bonds, the average Joe becomes the government's pawnbroker, loaning Uncle Sam a sum of money equaling the face value of the bond. The bond is redeemable by the buyer at varying Treasury interest rates. When John Q. Public either cashes in the security or redeems it at maturity, Uncle Sam pays up with earned interest. The advantage to both parties is that old Unc gets to use Mr. Publics money to help keep the country solvent, while John earns interest from a safe investment backed by the security of the United States government. Helping to fund and support one's country is a Biblical principle. When Moses was charged with building the Tabernacle and all of its furnishings in order to worship God, the people gave free offerings to the work: "And they received of Moses all the offering, which the children of Israel had brought for the work of the service of the sanctuary, to make it withal. And they brought yet unto him free offerings every morning" (Exod. 36:3).
While more than 50 million American have purchased U.S. savings bonds; banks, financial institutions, and foreign countries also buy U.S. T-bills, notes, and securities. Financial institutions prefer T-bills, which do not pay interest, but are discounted to create yields prior to maturity. The Treasury department advertises 13- and 26-week T-bill prices on Thursdays and auctions them off via online bidding at 1:00 p.m. on the following Monday. T-bills purchased at online auction are issued to buyers on Thursday of that same week. Most major commodities such as oil, grain and precious metals are bought and sold on the global market in U.S. dollars. Oil-rich governments of Japan and China frequently purchase U.S. securities and loan America money to generate dollars for trading on the international market, thereby reducing the U.S. national debt while helping to keep their own economies afloat. Another sector directly affected by Treasury bond rates is the U.S. housing market. Increases in bond yields raise fixed rate mortgages and make housing more expensive. When Uncle Sam pays John Q. a higher yield on U.S. savings bonds, the average home buyer can expect to pay more for a house. But higher home prices result in a sluggish real estate market, as would-be buyers balk at the escalating cost of home ownership. Conversely, lowering Treasury interest rates reduces fixed rate mortgages and makes housing more affordable. The result is a boost in real estate sales and a boom to the overall economy.
As the Treasury Departments bookkeeper, The Bureau of Public Debt monitors not only the national debt, but keeps tabs on the amount of securities bought and sold; along with Treasury bond rates paid to domestic and foreign investors. The Bureau also handles administrative functions pertaining to the sale and transfer of government securities, including tracing lost or stolen bonds and investigating claims of fraudulent or forged bonds and notes. Investors who have a tendency to shy away from risky ventures, favor low-risk, highly secure U.S. savings bonds and securities. Treasury interest rates are computed by adding a fixed rate, plus a six- or twelve-month inflation rate. Bond yields fluctuate on a daily basis depending on the highs and lows of the stock market; and savvy investors frequently re-sell them as quickly as they are bought to try to net higher but fluctuating yields. Investors hold onto long-term E bonds, EE bonds and I bonds for higher yields. The 30-year E savings bond pays interest every six months. T-notes with maturity dates of 2, 5, and 10 years also pay interest semi-annually, but minimum purchases start at $1,000. Short-term discounted T-bills can be redeemed in as little as a few days to six months.
Investors seeking to buy U.S. savings bonds, T-bills and notes at the highest Treasury bond rates can log onto the U.S. Treasury website. Thirty-year E bonds, short term T-bills, notes, and Treasury Inflation Protection Securities (TIPS) are all listed with detailed information on availability, face value, terms and current interest rates. Bidding electronically is as simple as clicking a mouse. The website includes directions for opening an individual account, directing transactions, and cashing in electronic savings bonds, which are redeemable at face value. Paper bonds are cashed in at half of the face value. Investors can also browse The Bureau of Public Debt's website for current products and interest rates. The Bureau website also offers 24/7 online access and guides account holders through the process of purchasing, maintaining, and redeeming government securities.
Buying savings bonds and securities from Uncle Sam is a smart way to invest in low-risk, highly-liquid, interest-bearing products. The interest rates can be relatively conservative, but provide a good hedge against inflation and, as such, are great short- and long-term investment vehicles. The longer investors can hold onto interest-bearing government securities, the higher the Treasury interest rates and the greater the bond yields. While the U.S. government incurs a tremendous amount of national debt, it is incurred to help secure the freedoms most Americans take for granted. United States citizens, foreign nations, and other entities which benefit from the wealth of the nation, can share in the responsibility of eliminating its debt by purchasing U.S. Treasury securities. That's an instance where profitability and patriotism go hand in hand.
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