Treasury Interest Rates

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.

US Treasury Note Rates

Returns on U.S. Treasury note rates and Treasury bill rates may be lower than other securities of the same maturity, but they are among the safest in the world. The notes and bills are backed up by the government of the United States and are considered nearly risk-free investments. The securities have some risks, of course, but this is mainly related to whether one will be able to sell them at profit if the need arises for them to be sold before maturity. Interest payments are generally exempt from state and local taxes, although federal taxes still apply. They can be bought through a broker or directly from the federal government. (If they are bought from the government, these securities can not be redeemed before they come to maturity. However, a broker can sell them for a customer in a secondary market.)

First, one needs to know the difference between the various securities. Treasury bills (T-Bills), notes (T-Notes), and bonds (T-Bonds) are three different entities. T-Bills have a maturity of one year or less. They have 4 week, 13 week and 26 week maturity levels. The Treasury bill rates are determined by weekly auction and depend upon what the bidders are willing to pay. Many regard T-Bills as the safest investment for the US investor. T-Bills do not provide interest payments. However, these are the only type of government security which can be purchased at a discount to face value. At maturity, the investor receives the face value of the bill. The profit comes from the difference between purchase price and face value. For example, if the customer pays $990 for a bill, and is paid $1,000 at maturity, the profit is $10. At a single auction, an investor is allowed to purchase up to $5,000,000 in T-Bills at the current auction's rates. (Note: There is another type of bill, whose purpose is cash management. These bills are not on a regular schedule. The terms may vary and are normally only for a few days.)

T-Notes are issued at maturities of 2, 5, and 10 years. There is a monthly auction for the 2 and 5 year notes, and the 10 year notes are auctioned eight times a year. Specific auction dates are shown on an auction schedule. This schedule is available on line and one can also sign up for notifications of such auctions by email. All US Treasury Note rates are paid interest twice a year. Like all government securities, notes are held and issued electronically. (Securities used to be issued in paper form, but these have all matured.)

Treasury Bonds are usually issued in 30 year maturities. T-Bonds also pay interest every six months. All of the various types of securities are issued in face values of $1,000. There are separate purchase minimums for each type of security. The minimum purchase is $1,000. An investor can usually get a better deal by buying directly from the US government. In fact, the government has a program designed to cut out the middleman. Under this system, no brokerage or transaction charges are imposed. If your account is greater than $100,000 an annual maintenance fee is charged. Check the website of the US Treasury for details on this special program. The program's name is Treasury Direct.

What about the return rates for these investments? US Treasury note rates and Treasury bill rates are in the news fairly often these days and they are regarded as important economic indicators. Other financial instruments, such as money market accounts, certificates of deposits, and mortgages take cues for their rates from US government securities. However, due to the nearly risk-free nature of these investments, the yield from Treasury notes and bills is low when compared with more risky ventures. Yet these are often an important part of an investor's portfolio. At times, one may wonder if it would be simpler and more profitable to just put extra funds in a savings account which is offering a better rate of return. However, remember that these returns are taxable by state, local and federal agencies, while interest from investments in US government securities are only subject to federal taxes. This factor, coupled with the knowledge that rates on savings accounts change fairly often, leads an investor to believe that returns from US Treasury note rates or Treasury bill rates may be a better bargain in the long term.

Speaking of the long term, do not forget to invest in the lives of others as returns are realized from the investments. This helps to guard against greed and a preoccupation with gaining wealth. It also blesses the lives of those who receive the gifts and help. Remember, He that despiseth his neighbour sinneth: But he that hath mercy on the poor, happy is he. (Proverbs 14:21)

In summary, investing in securities is a valid part of a portfolio. As with any investment, be sure to take the time to examine terms, conditions and fees which may apply to the account. Although US Treasury note rates and Treasury bill rates may not be spectacular, they are steady and sure investments. Since the securities are widely traded, T-Notes and T-Bills can be considered a fairly liquid investment as well. Coupled with a generous spirit, these securities can make a positive difference in the lives of others as well as oneself, which is an investment that will bring a sure reward.

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