August 12th, 2010 | 
Author: 
Debt securities issued by the US Treasury, the US government sponsored enterprises, the US government agencies, and the US government enterprises are one of the world’s most liquid bond markets and also one of the world’s largest bond markets. Treasury securities cover the lowest risk in the bond market as they are guaranteed by the US governments taxing authority. Treasury securities are used to finance the federal government debt whereas government sponsored enterprises and government agencies issue debt to enable Americans to own homes. In this way they support their role in financing mortgages.
Choosing the right kind of government bond is a choice you have to make. The type of bond that should be purchased solely depends upon the choice of a person. There are different types of government bonds; municipal bonds are issued by the local municipalities or state governments whereas federal bonds are issued by the federal government. These bonds offer special tax incentives for investors as they are quite different from regular bonds. These bonds can be purchased from a variety of sources such as banks or brokerages. The revenue earned is generally used for financing government projects or activities.
Since investors get the benefit of tax incentives from these bonds, each government bond has its own specialty. The interest earned in municipal bonds is free from federal taxes whereas the interest earned from other bonds is generally exempt from any local or state taxes.
The US Treasury issues five types of debt securities, the most common issues are bonds, which have 30-year terms; notes, available with 2-, 5- or 10-year terms; and bills available with 13-, 26- or 52-week terms. Treasury bonds are sold in $1000 denominations three times a year — in February, August, and November — and these bonds pay higher rates of interest. A person can invest from $1000 to a million dollars. A program known as TreasuryDirect lets you buy the bonds directly from the US Treasury website. But one should be careful as their prices fluctuate to reflect the changes in demand.
Posted in 
Tags: