Europe. Treasury Bonds, Bills and Notes: What They Are and How to Buy

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The investor will get relevant information about the most secure investment to provide by having found a reliable and experienced investing partner. Like in the U.S., the European government provides the safest tunnel of investments that are fixed-income investments issued by the Department of Treasury.

What Are the Treasurys?

Europe Treasurys are fixed-income securities backed and issued by the federal government assuring complete loyalty and credit. It means that the European government must find a way to repay the debt. Treasurys are regarded as low-risk investments. That’s why it is so popular and widely used among European investors.

Treasury types are differentiated base on the length of time until they become mature or expired. Types of Europe Treasury bonds are:

  • Treasury bills — short-term debt securities issued for less than a year;
  • Treasury notes — intermediate-term debt securities issued for two, three, five, seven, and ten years;
  • Treasury bonds — long-term debt securities issued for 10-30 years:
  • another type kept up with inflation — Treasury Inflation-Protected Securities (TIPS) issued for five, ten, and 30 years.

How Do Treasurys Work?

The Europe Treasury Department carries out an auction where it sells all notes, bonds, and bills at a fixed interest rate. When demand is rising, the buyer is willing to pay more than the face value in order to get the fixed rate.

Accordingly, the Treasury Department commits to pay the interest rate for TIPS, bonds, and notes every six months. For bills, it pays only when it gets maturity. In case the investor holds on to the Treasury until the term, he will receive back the face value alongside the interest paid over the bond’s life. The minimum investment amount is $100.

What Way to Choose in Buying the Treasury?

There are three ways to buy the Treasury.

Noncompetitive bidding auction

Most individual investors prefer this method. They have a clear understanding of what notes to buy and are ready to accept ant yield. Thus, they simply go to the Treasury direct website and complete their purchase.

Competitive bidding auction

This method is wanted for those investors who are only willing to buy the Treasury if they receive the desired yield. In this case, they have to cooperate with the bank or broker.

Secondary market

At the secondary market, the owners sell their securities before they get mature. Here, the broker or bank acts as a mediator.