man with smartphoneInvesting in bonds is considered as one of the safest investments for those who try to avoid big investment risks. A bond is basically a type of certificate that is issued by an organization or a government that comes with a promise of payment for a specified amount at a specified date. Examples of bonds commonly being bought as investments are US treasury bills, US Savings bonds and other similar notes. The advantage of these bonds is that they can help protect your principal, given that the “lender” is the US government. Such bond investments can even provide good returns. They come in a wide range of maturities. Some US-issued bonds can mature in a matter of days while some can take as long as 20 years to mature.

In the bond market, government entities usually sell treasury securities. They use these bond issues as debt instruments to help keep the government running and to pay off outstanding debts. One of the reasons why Treasury securities are considered safe investments is that they are backed by the government that issues them.

Bonds and other similar investments are transferable in the open market. They are also available via competitive and non-competitive bidding at auctions. The difference between bills, notes and bonds is largely based on their different maturities. Bills mature in a year or less, notes in two to 10 years, while bonds mature in 30 years. Income earned from Treasury bills and similar securities are exempt from state and local taxes.