Official Bonds

 

 

Official Bonds or Treasury bonds are bonds issued by the US Department of Treasury. These bonds are insured by the Federal Deposit Insurance Corporation (FDIC) and guaranteed by the US Government. These official bonds are one of the best methods to diversify your investment portfolio. Treasury bonds usually come with a maturity period of 30 years and the interest income is paid semi-annually. You will be paid according to the face value upon completion of the maturity period.[br]

Official Bonds: Bidding

The yield and price of official bonds are determined by an auction. This means that the price can differ from the face value. Government bonds are sold by:

• TreasuryDirect

• Brokers

• Banks

• Dealers

 

Similarly, individuals and institutions such as estates, trusts, partnerships and corporations can buy official bonds online itself through TreasuryDirect.

 

Noncompetitive Bid: When you opt for this type of bid, you agree to accept the interest rate that is determined at the auction. This way, you get the guarantee to receive the bond you are interested in at the amount of bond you want.

 

Competitive Bid: With this bid, you can specify the yield you want. Your bid will be accepted for the full amount if your required yield is less than or equal to the yield determined at the auction. Your bid will be rejected if the required yield is higher than the yield that is set during the action.

Official Bonds: Important Facts

The following are a few important facts associated with US Treasury Bonds:

 

• The minimum purchase of official bonds is $100.

• You can buy bonds in increments of $100. 

• You can either hold a bond until the maturity period or sell the bond before maturity. You can buy the Treasury bonds up to $5 million by non competitive bidding or 35% of initial offering by competitive bidding.[br]

Official Bonds and Forms

Bonds are of two forms:

• paper certificates

• electronic entries

 

Older bonds are of paper forms while new bonds are issued in electronic form. Treasury Direct can help you to convert your paper certificates into electronic entries.

 

Treasury bonds or official bonds help both institutional and individual investors to reduce the risks associated with their portfolios. Most of the foreign governments that have substantial trading activities with the US government invest in Treasury securities since it serves well as a good investment option for risk-averse investors.