Government securities are financial tools used by various levels of government, like national, state, or local authorities, to raise funds for their activities and initiatives. These investments are often seen as secure because they are guaranteed by the government that issues them, and they usually provide returns with low risk. Here are some common types of government securities:
- Treasury Bills, Bonds, and Notes: These are loans given to the U.S. Treasury to help pay for its regular operations and specific projects. Treasury bills are for short-term funding, lasting less than a year, while bonds and notes are for longer periods.
- Municipal Bonds: Local governments or cities issue these loans to support public works like building roads or providing community services. They are attractive to investors as they are often free from federal income tax.
- Government-Backed Bonds: These loans are made by government agencies or entities, like the Tennessee Valley Authority or the Federal National Mortgage Association. The reliability of these bonds comes from the strong backing of the agency issuing them.
- Sovereign Debt: Issued by national governments, these loans are also known as government bonds. They are low-risk investments since they’re backed by the country that issues them and usually have low-interest rates.
Investors buy these securities for the steady income from interest payments or to include a stable, low-risk element in their diverse investment portfolio. You can buy government securities through brokers, banks, or directly on government websites like TreasuryDirect for U.S. securities. They are also available through mutual funds and exchange-traded funds (ETFs).