These debt securities represent a loan made by an investor to the nation’s federal authority. The government promises to repay the principal amount upon maturity, along with periodic interest payments known as coupon payments. A common example includes Treasury bills, which mature in a year or less, and Treasury bonds, which have longer maturity periods.
Such instruments play a vital role in funding government operations and managing the national debt. They are considered a relatively safe investment due to the backing of the full faith and credit of the issuing entity. Historically, these securities have provided a stable avenue for individuals, institutions, and foreign governments to invest in the financial stability of the nation, while earning a return on their investment.
