A good article from the archives from September 26, 2011 about buying US Treasuries. Worth posting again as I occasionally like to look back…
Investors are buying US Treasuries in a flight to security as both the European and American economies promise to stay in the doldrums from a prolonged period. Stocks have fallen sharply and risen again several times of late as uncertainty has led to persistent market volatility. Oil futures are down as are stocks. Gold futures are down as well, even in light of a retreat of the NYSE, NASDAQ, and stock markets across the world. It would appear as though those interested in gold investing are also uncertain about the duration of the decade long bull market in the precious metal. Investors are buying US Treasuries in this uncertain world even after Standard and Poors downgraded US debt after the Capitol Hill fiasco in which congress and the president were unable to come to a quick compromise on raising the US debt ceiling. With the use of sound fundamental and technical analysis traders can profit from swings in interest rates when buying US Treasuries and selling them. Candlestick analysis of interest rates helps traders objectively anticipate market trends and market reversal in rates and profit thereby.
Recently investors were buying US treasuries, the ten year note, for as low as a 1.76% yield. US Treasury notes are issues form terms ranging from one to ten years in denominations of $1,000. $1,000 is what the investor will receive if he holds the note to maturity. He will also receive taxable interest every six months for the duration of the note. What he pays when doing this will depend upon the market. By comparison Treasury Bills have maturities of four weeks to a year. They are sold at a discount and the investor receives the par value of Treasury Bills. For those interested in long term investing when buying US Treasuries there is the Treasury bond. These are typically sold as a 30 year bond. Sales of the gold bond have fallen dramatically in last decade or more as those buying US Treasuries have been concerned about inflation eating away at the value of their long term investment. Traders, however, can profitably buy bonds or sell bonds. In a stable currency this is essentially interest rate investing. On the other hand investing in the national debt of several of the so called PIIGS nations (Portugal, Ireland, Italy, Greece, and Spain) is a bet on whether these nations will default on their debt or be bailed out by wealthier members of the EU and foreign investors in the nick of time.
US Treasuries are issued with a fixed rate of interest. One can purchase them directly or in the secondary market, through a stock broker, for example. Traders profit as investors perceive market risk to be too high throughout the world and engage in buying US Treasuries. Traders use Candlestick patterns to anticipate interest rate movement just as they use Candlestick pattern formations in stock trading, options trading, and futures trading. To a degree buying US Treasuries involves foreign currency trading. Investors buy dollars with Euros, Yen, or British Pounds and then, by buying US Treasuries, hold assets in US dollar denominated instruments and hold an investment that has never defaulted. Traders can also profit by keeping an eye on the Forex markets in case of a flight to the dollar as things worsen.