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Are United States Treasury securities risk free? Justify your position.  

Are United States Treasury securities risk free? Justify your position.  

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Though United States securities have low risk but they are not risk free securities. There are two ypes of risk in the bond market, the interest rate risk and credit risk. US treasury securities are risk free in terms of credit risk becuase US governent has never faulted. However, there exists interest rate risk for medium term and long term bonds. The interest risk occurs if the investor sells the bonds before maturity depending on the interest rate fluctuation. Bond prices are inversely propotionate to interest rates. So there exists interest rate risk for US bonds specially for long term bonds.

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