Treasuries: What They Are and How They Influence the Market

2023-09-26 11:58:54

Treasuries are securities issued by the American Treasury that work in a similar way to Tesouro Direto in Brazil. These investments have become quite popular recently, due to the increased returns offered by these assets, which has made them attractive to investors.

The Market and Treasuries

With the increase in Treasury rates, these assets have become very attractive to investors, especially in a post-crisis market. Many investors chose to change their portfolios, leaving the stock market and investing in Treasuries. This change is motivated by the fact that Treasuries are considered less risky and offer a good return.

The United States Federal Reserve (FED) and the European Central Bank (ECB) minimized the severity of the increase in interest rates on Treasuries, explaining that this increase is common in a post-pandemic crisis scenario. The FED predicted good growth for the country and assured that the interest rate will remain between zero and 0.25% until the first quarter of 2024.

What Are Treasuries?

Treasuries are the American Treasury and work in a similar way to Tesouro Direto in Brazil. When you invest in Treasuries, you are lending money to the government in exchange for an interest rate. These securities are mainly used by more conservative investors who prefer to avoid risks.

There are different types of Treasuries, each with specific characteristics:

1. Treasury Bills ou T-Bills

T-Bills are short-term bonds, with a maturity of up to one year. Several countries use these bonds as the basis for their income.

2. T-Notes ou Treasury Notes

T-Notes are medium-term bonds, with maturities between 2 and 10 years. Many investors use these securities as a prediction of what will happen to the market in terms of inflation and growth.

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3. Treasury Bonds ou T-Bonds

T-Bonds are long-term bonds, with a maturity of between 20 and 30 years. This type of bond is used for long-term goals, such as retirement.

4. TIPS ou Treasury Inflation Protection Securities

TIPS are securities whose remuneration is directly linked to inflation. They are a hedge against the loss of purchasing power caused by inflation.

How Treasuries Influence the Market

Treasuries play a fundamental role in the economy and influence various aspects of the financial market.

1. Interest Rate

Treasuries interest rates are used as a reference for the financial market as a whole. When rates rise, this can influence the increase in loan, financing and mortgage rates, directly affecting consumption and investment.

2. Stock Market

Treasury rates can also have a significant impact on the stock market. When rates rise, investors may be attracted by the higher returns offered by Treasuries, choosing to sell their stocks and invest in these bonds. This could lead to a crash in the stock market.

3. Inflation

Treasuries are a form of protection against inflation. When inflation is expected to rise, investors may look to invest in Treasuries to preserve the value of their money. This can lead to an increase in demand for these bonds and influence the interest rate.

4. Exchange

Treasuries can also have an impact on the foreign exchange market. When foreign investors invest in Treasuries, it can lead to an appreciation of the US currency. On the other hand, if foreign investors decide to sell their Treasuries, this could lead to a devaluation of the currency.

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Treasuries are securities issued by the US Treasury and are a safe, low-risk investment option. They are mainly used by more conservative investors who seek protection against inflation and attractive returns. Furthermore, Treasuries play a fundamental role in the economy and influence various aspects of the financial market, such as interest rates, stock markets, inflation and exchange rates.

If you are considering investing in Treasuries, it is important to understand the different types of securities available and evaluate which one best suits your financial goals. Remember to always seek up-to-date information and consult a specialized professional before making any investment decision.

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