Treasury bond vs. investment risk

Investing in treasury bonds

Treasury bonds are a kind of mass trading securities issued in series. They confirm the property rights of the bondholder (the person who acquired them) in relation to the issuer, i. e. the institution that issued them. The issuer acts as a debtor of its bondholders.

Treasury bonds may be issued by different entities. These may be treasury bonds issued by the State Treasury, or municipal bonds issued by local governments. The last group consists of bonds issued by private entities, issued by natural or legal persons, most often companies.

Treasury bonds also differ in the level of investment risk. Like any financial investment, the purchase of treasury bonds always involves a greater or lesser risk. The level of risk associated with the purchase of bonds is usually measured by the so-called „risk measurement”. rating, i. e. credit quality. It is assumed that the higher the rating, the lower the investment risk.

Treasury bonds issued by national governments and international organisations are considered the safest. Of course, the more stable and better developed the economy of a given country is, the higher the rating of bonds issued by it will be. When considering the purchase of treasury bonds, it is worth taking into account factors such as the country’s economic situation, its international policy, the stability of the political system and the national currency.

The least safe are bonds issued by low-rated entities, often called junk bonds. This group includes bonds of small or unprofitable enterprises and local government units in the best economic situation. These bonds are much more risky: you can make a lot of money on them, but you can also lose a lot.

Investing in treasury bonds: