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Govt. Securities

In: Business and Management

Submitted By jiggy3
Words 306
Pages 2
backs all of its securities, guaranteeing full payment at maturity dates; therefore, the more the government sells securities today, the more its future obligation to pay off the holders. Some believe that the increased future liability of the US due to the sale of securities (again, known as public debt) can be detrimental to the economy as it puts ever increasing pressure on the future generations to make good on the payments. For example, if you buy a 30-year Treasury bond today, the obligation to pay you in 30 years will fall on the taxpayers or investors of that time, many of whom have not even been born yet.
For now government securities are one of the most secure investments one can make. They are considered secure because the general belief is that the issuing government (in our case the US) will continue to have a prosperous economy way into the future therefore having virtually no risk of defaulting on payments. In fact, they are considered so safe that many foreign governments use such securities to back their economies. Recently an Australian bank replaced a large portion of its holdings in gold with bonds issued by the governments of the USA, Japan, and Germany. This confirms the genuine trust that has been placed on government securities and why they are such powerful instruments of the economy.
Types Of Government Securities
The US government issues several types of securities to raise money for its operations. Again, all of these securities are backed by the government. These securities fall into two categories, marketable and non-marketable. Marketable securities can be bought and sold in the open market (known secondary markets) by the investors, and their prices rise and fall depending on the market conditions (e.g., demand, inflationary conditions, etc.). Non-marketable securities on the other …

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