The U.S. Treasury bonds have the largest stock and the best liquidity, and are considered to be the closest to risk-free assets. There are also Australian media, who believe that the credit rating of the U.S. government is widely regarded as the most reliable in the world, at least one of the highest ratings.
This credit rating ensures that even in turbulent and recessionary periods, U.S. Treasury bonds can still serve as a stable "safe haven" for the global economy, providing a stable air-raid shelter for the global risk-averse economy . For example, since the Russian-Ukrainian conflict, a large amount of European funds have flowed into the United States.
There is also a view that: U.S. debt is a typical Ponzi scheme, and it is the largest Ponzi scheme in the world today, with great potential risks, rather than almost no risk. People who hold this view suggest that many countries begin to gradually move away from U.S. debt.
During the period when U.S. Treasury bonds were first issued, the U.S. federal government had its own money, could pay the principal, and could pay the interest - all of which were within the scope of its own fiscal revenue, even if it was prepaying future income in advance, the so-called "eating the grain of the next year in the current year".
But later, the scale of US debt became larger and larger, and the "deficit" between US fiscal revenue and expenditure became higher and higher, reaching the terrible point of "borrowing new debt to repay old debt, or even borrowing new debt and paying interest".
The huge scale of US debt and the subsequent unsustainability are considered to be extremely huge potential risks. However, in the eyes of those who support US debt, this is an important factor in "making it the closest to risk-free assets" - large scale is beneficial.
Classification of US debt
US debt is a broad term. In fact, US debt, like domestic bonds, also includes credit bonds and interest-bearing bonds.
Among them, interest-bearing bonds refer to bonds that have no credit risk, that is, they are very safe and can definitely repay principal and interest. Its market performance is only affected by interest rates, so it is called interest-bearing bonds. Typical interest-bearing bonds are national bonds and local government bonds;
After talking about interest-bearing bonds, let's look at credit bonds. As the name suggests, credit bonds have credit risks. That is, they may not be able to repay principal and interest. Typical credit bonds are corporate bonds. Since enterprises have this risk of thunder, the yield of credit bonds is generally higher than that of interest-bearing bonds.
In general, since the issuers of credit bonds are of varying quality, they are more suitable for investors with higher risk appetite and strong professionalism, so they are not the focus of this video. So let's focus on interest-bearing bonds that are more suitable for most people.
How to play with interest-bearing bonds?
Taking U.S. Treasury bonds, as an example, can be divided into three categories according to different maturities:
·Treasury Bills with a term of less than or equal to 1 year, referred to as T-bills;
·Treasury Notes with a term of more than one year but not longer than 10 years, referred to as T-notes;
·Treasury Bonds with a term of more than 10 years, referred to as T-bonds.
