Question

Are US treasury bonds still considered safe?

Are US treasury bonds still considered safe?

Homework Answers

Answer #1

US treasury bonds are still considered relatively safest among most of sovereign nations. There cannot be 100% claim of safety on US treasury bonds but there are remote possibilities that US would default on its own bond payments. The risk would arise on US treasury bond when US decides for not honoring its own committed bond payments then that can be result of collective and conscious decision of US democracy and government.

In case US is in deficit then federal government has option to print new currencies or issue fresh currencies and settle its own obligation but such act results in inflation or super inflationary situation in country. Inflationary situation is better than defaulting on payments hence there are very thin chances that US would default on its own payments. Therefore, US treasury bonds still considered safe.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The sale of US treasury bonds by a French investor shows up as , why is...
The sale of US treasury bonds by a French investor shows up as , why is not a credit on the capital account?
Currently, the yield‐to‐maturity on zero‐coupon 10‐year US Treasury bonds is 0.66% (0.0066 < 1%). You buy...
Currently, the yield‐to‐maturity on zero‐coupon 10‐year US Treasury bonds is 0.66% (0.0066 < 1%). You buy these bonds at $936 per bond and plan to keep them as a “safe” long‐term investment (say, 4 – 5 years). The face value is $1,000 at maturity. Suppose that, starting next year, interest rates start increasing at a speed of 1% per year (1.6% in 2021, 2.6% in 2022 and so on) and the yield on these bonds follow a similar upward trend....
Consider the following bonds: Bond Issuer Time to maturity Coupon rate Coupon frequency 1 US Treasury...
Consider the following bonds: Bond Issuer Time to maturity Coupon rate Coupon frequency 1 US Treasury 3 years 8% Semi-annual 2 US Treasury 5 years 3% Annual 3 US Treasury 5 years Zero N/A 4 US Treasury 5 years 3% Semi-annual All else being equal, rank the bonds (1,2,3,4) from highest to lowest sensitivity to interest rate changes.
Qualitatively what will happen to the price of your bonds if: you own Treasury Bonds and...
Qualitatively what will happen to the price of your bonds if: you own Treasury Bonds and a deep decline in US GDP occurs? you own Treasury Bonds and the FED tries to stimulate the US economy? you own Hauser Oil Corporate Bonds, and Hauser Oil has a massive oil spill?
An investor holds $500,000 worth of US $ Treasury bonds. These bonds are being quoted at...
An investor holds $500,000 worth of US $ Treasury bonds. These bonds are being quoted at 105% of par. The investor is concerned, however, that rates are headed up in the next six months. He/she is advised by his/her broker to set up a hedge using Tbond futures contracts. Assume these contracts are now trading at 111’06 a) Briefly describe how the investor would set up this hedge. Would he go long or short? How many contracts would he need?...
If there is an increase in the risk of default for corporate bonds, relative to US...
If there is an increase in the risk of default for corporate bonds, relative to US Treasury bonds, then we would expect that the demand curve for corporate bonds will _____ and the demand curve for US Treasury bonds will _____. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase
Historical average returns for Large Company Common Stocks, Long Term Government Bonds, and US Treasury Bills...
Historical average returns for Large Company Common Stocks, Long Term Government Bonds, and US Treasury Bills for the period 10-year period of 1999 through 2008 are shown in the following table. Use these data to solve the next several problems. Year Large Common Stock Long Term Government Bonds US Treasury Bills 1999 0.2104 -0.0751 0.0480 2000 -0.0910 0.1722 0.0598 2001 -0.1189 0.0551 0.0333 2002 -0.2210 0.1515 0.0161 2003 0.2889 0.0201 0.0094 2004 0.1088 0.0812 0.0114 2005 0.0491 0.0689 0.0279 2006...
Suppose that you inherited some 2.25% US Treasury bonds from your grandfather that mature in 2027....
Suppose that you inherited some 2.25% US Treasury bonds from your grandfather that mature in 2027. Although they were originally purchased at par (and will mature at $1,000), they currently have a market value of around $950 each. If you believe that interest rates will continue to rise, should you sell, hold, or try to buy more? Explain why.
Suppose a US Treasury has 5% coupon, a face value of $1,000, and 2yrs to maturity....
Suppose a US Treasury has 5% coupon, a face value of $1,000, and 2yrs to maturity. What is the price if similar bonds yield 1%, 5%, or 7%?
how can you assist a person with dementia to stay safe and happy whilst still having...
how can you assist a person with dementia to stay safe and happy whilst still having a level of independence