THE BASICS OF GOVERNMENT BONDS

To fund government programs and to meet its payrolls, the U.S. Government issues its own bonds from the Treasury and from several government agencies. Institutional investors trading very large blocks of bonds do most of the trading in these securities. Most individual investors invest in government bonds through mutual funds. Overall, U.S. Government bonds are very popular with investors worldwide.

Government bonds offer fixed interest rates. Many people consider them the safest of all because of the creditworthiness of the U.S. Government. Most government bonds do not have specific collateral backing them. Instead, they are backed by the full faith and credit of the U.S. Government.

Government bonds have maturities from one to 50 years. Although some government securities last less than one year, those securities are really part of the money market. They are technically not bonds. They are discussed in the tutorials on the money market and Treasury bills.

Let us turn now to the bonds themselves, beginning with Treasury bonds.