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Customer & Course Essay

Treasury securities are government bonds issued by US State Dept. of Treasury. These are debt financing instruments better known as treasuries. There are somewhat 6 types of treasury securities of which 4 are marketable and 2 are non-marketable. Since we are assuming a short-term horizon, such investment options should be chosen which are as low-risk as possible i. e. those investments whose yield is even. Hence we would be discussing whether treasury bills or treasury bonds for that matter are more risky.

Treasury bills or T-bills are sold in terms ranging from a few days to 52 weeks. They are sold at discount to par (face) value. However when they mature the full par value is paid to its holder the difference between the purchase price and face value being the interest earned. Treasury bonds on the other hand are issued in terms of 30 years, previously their terms used to range from 10 to 30 years. Both purchase price and yield of the bond are determined at its auction.

Interest is paid every 6 months until maturity when the face value of bond is paid (this could be greater or lesser than the purchase price). (Treasury Bonds) Considering a short-term investment

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horizon Treasury bonds are more risky than T-bills probably because they cover a much longer time period and economic situation can change considerably over a period of 30 years. Moreover the uncertainty surrounding the face value i. e. the possibility of it being more or less than the purchase price also adds to the risk.

Moreover since these securities are being issued by the government any radical changes in the state’s apparatus can alter or abandon such schemes altogether which is what happened in 2001 when T-bonds were discontinued for 4 years. To Conclude-bills are therefore a better, much secure and lesser complicated option than Treasury bonds in a short-term investment horizon. References “Treasury Bond-in Depth” (n. d). Treasury Bonds in Depth retrieved on February 1, 2009 from <http://www. treasurydirect. gov/indiv/research/indepth/tbonds/res_tbond. htm>

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