U. S. GOVERNMENT SECURITIES
The U.S. Government issues its own securities from the U.S.
Treasury and several government agencies. U.S. Government securities are very
popular with investors worldwide. They offer fixed interest rates and have
durations comparable to corporate bonds. These securities are considered by many
to be the safest of all because of the creditworthiness of the U.S.
Government.
The Treasury also issues Treasury notes and Treasury bills. It
sells its securities at regular auctions or from banks or brokerage firms. The
income these securities earn is subject to federal taxes, but not state
taxes.
Government bonds are quoted on $100 even though their face value
(par) may be $1,000. Fractions are given in 32nds. The fraction appears after
the decimal point in the quotation. For example, a bond quoted at 88.8 would
have a price of $882.50 ($880 + 8/32 of $10).
Government securities exist in two broad forms.
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Marketable securities can be traded on the
secondary market through exchanges or over the counter.
Non-marketable securities can be redeemed
only back to the government.
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Let us
look at both these types, beginning with the marketable
securities.
