In this way, the semiannual income earned is invested and becomes part of the principal, which in turn earns more interest. When purchased in a taxable account, accrued interest is exempt from state and local taxes while subject to federal taxation. There are no higher quality debt obligations available in the world today than U.S. Treasury securities. Treasury securities are direct debt obligations of the U.S. government and are backed by the taxing power of the U.S. government to ensure timely payment of interest and principal. The yields of most Treasuries securities are established at auctions, ensuring that investors will receive competitive rates of return in the prevailing interest rate environment.
Most Treasuries pay interest twice each year.
Liquidity U.S. Treasury securities trade in one of the largest and most active secondary markets in the world. As a result, investors wishing to sell their securities before maturity can do so quickly and easily. Diverse Maturities Investors wishing to diversify their investments among a number of different maturities can do so with U.S. Treasury securities. Initial maturities, ranging from as short as three months to as long as 30 years, allow portfolios to be structured to meet individual cash-flow needs. All U.S. Treasuries are exempt from state and local taxes, but are fully taxable on the federal level.