Benefits

The primary benefit from Treasury securities is interest income, like all other debt securities. Some Treasury securities pay consistent semi-annual interest (Notes, Bonds, and TIPS), while some only pay interest at maturity (Bills, STRIPS, and T-Receipts).

Agency securities also provide income to their investors, sometimes on a more consistent basis. As we discussed, mortgage backed securities typically pay monthly income to investors. For investors in need of more frequent interest payments, pass through certificates and collateralized mortgage obligations (CMOs) can be a good solution.

US Government and agency securities are generally safe from default risk as they’re all directly or indirectly backed. In most cases, these securities are AAA or AA-rated. Also, liquidity risk is virtually non-existent with US Government securities. The market for US Government securities is the largest in the world and is subject to global demand. If an investor needs to sell something like a Treasury bond, they can easily find a buyer.