Discuss why the interest rate on U.S. Treasury securities is lower than on other types of bonds.
The value of U.S treasury security is lower in comparison to the value of bonds. The major type of U.S securities is including the bill, bonds and other debt obligation of working. The purchase of U.S securities resulted in the money lending from the federal government of the country. this lending option has backed up with the true and fair securities by the bank. the increase in securities ultimately increases the tax revenue income of government. On the other hand, the government bonds and securities do not increase the “credit risk” for government but they have high interest and paid values for people.
Treasury security, are lending money to the federal government for a specified period of time. Because these debt obligations are backed by the “full faith and credit” of the government, and thus by its ability to raise tax revenues and print currency, U.S. Treasury securities – or “Treasuries” – are generally considered the safest of all investments. They are viewed in the market as having virtually no “credit risk,” meaning that it is highly probable your interest and principal will be paid fully and on time. As the interest rate on U.s treasury securities is lower than other types of bonds because treasures are backed by the U.S. government, and by extension the U.S. economy and society as a whole. This is perceived as safer than individual corporate bonds, and therefore the yields don’t need to be as high. So being a much more safer property, is the reason behind the lower interest of treasure securities.