Federally Guaranteed Obligations
- A federally guaranteed obligation is debt that is backed by the full power of the United States government. This type of debt is considered risk-free because it is guaranteed by the full faith and credit of the United States government.
Examples of federally guaranteed obligations include Treasury bills (T-bills), Treasury notes and Treasury bonds. These different obligations are categorized based on length of time before maturity. Bills mature in less than one year; notes mature in one to 10 years; bonds mature in more than 10 years.
Bonds are considered safe when the issuing country is deemed economically stable. The debt of developing countries would carry more risk because their instability can lead to payment default.
Investment dictionary. Academic. 2012.
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