Investing in U.S. Treasuries

U.S. Treasury securities are debt obligations of the United States government – a loan in which, the purchaser of the security is the lender, and the United States government is the borrower. U.S. Treasury securities are backed by the “full faith and credit” of the U.S. government. Because of the government’s ability to raise tax revenues and print currency, if necessary, to meet its debt obligations, U.S. Treasuries are considered to be one of the safest types of investments. Because of the relative safety, U.S. Treasury securities typically have interest rates that are lower than other types of debt instruments.

Treasury Issues. U.S. Treasury securities are issued through an auction process in the form of T-Bills, T-Notes, T-Bonds and TIPS (Inflation Protected Securities), with varying length of maturities depending upon the type of security.

Taxation of U.S. Treasury Securities. Interest on T-Bills, T-Notes and T-Bonds is exempt from state and local income tax, but subject to federal income tax. Interest and growth of principal on TIPS is exempt from state and local income tax, but subject to federal income tax.

Fixed income securities are subject to market risk and interest rate risk. If sold in the secondary market prior to maturity, investors may experience a gain or loss depending on interest rates, market conditions and the credit quality of the issuer. B.C. Ziegler and Company does not provide tax or legal advice. Please consult your tax advisor regarding the suitability of these investments in your portfolio.