# UST: What it is, How it Works, Application

## What Is UST?

UST is the abbreviation for the United States Treasury, the federal government division that manages U.S. finances. UST is commonly used to reference debt that is issued by the United States.

### Key Takeaways

*   UST is the abbreviation for the United States Treasury, the federal government division that manages U.S. finances
*   UST is commonly used to reference debt that is issued by the United States.
*   Organizations under the purview of the UST include the IRS, U.S. Mint, the Bureau of Public Debt, the Office of the Comptroller of the Currency, and the Alcohol and Tobacco Tax Bureau.
*   UST securities are presumed to have little to no risk of default.

## Understanding UST

The UST issues securities to raise money to run the federal government. Some of the government branches operating under the UST umbrella include the [Internal Revenue Service](https://www.investopedia.com/terms/i/irs.asp) (IRS), the U.S. Mint, the Bureau of the Public Debt, and the Alcohol and Tobacco Tax Bureau. In addition to [treasury bills](https://www.investopedia.com/terms/t/treasurybill.asp) (T-bills), the U.S. Treasury issues notes, bonds, [floating-rate notes](https://www.investopedia.com/terms/f/frn.asp) (FRN), and [U.S. Savings Bonds](https://www.investopedia.com/terms/u/ussavingsbonds.asp).

Traders use the phrases "UST yields" to refer to Treasury yields or "UST curve" to refer to the [Treasury yield](https://www.investopedia.com/terms/t/treasury-yield.asp) curve concerning asset pricing. The U.S. Treasury is the department of government that is responsible for issuing debt in the form of [Treasury bonds](https://www.investopedia.com/terms/t/treasurybond.asp), bills, and notes.

In addition to marketable securities, there are also non-marketable UST securities. These securities are not transferable; they cannot be traded on an exchange. UST savings bonds fall into this group.

The function of the U.S. Department of Treasury is the management of money and cash flow for the federal government. It manages the sources and uses of funds. It also works in conjunction with the [Federal Reserve](https://www.investopedia.com/terms/f/federalreservebank.asp) to develop economic policy.

Formally established in 1789 by the First Session of Congress, the institution came into being before the signing of the Declaration of Independence. Alexander Hamilton was the first [Secretary of the Treasury](https://www.investopedia.com/terms/t/treasury-secretary.asp), installed on Sept. 11, 1789.

## UST Securities and Asset Pricing

Much of finance is about the pricing of assets. UST securities are assumed to have virtually no [default risk](https://www.investopedia.com/terms/d/defaultrisk.asp). As a result, these securities are often used as a proxy for a [risk-free asset](https://www.investopedia.com/terms/r/riskfreeasset.asp).

UST securities set the [benchmark](https://www.investopedia.com/terms/b/benchmark.asp) for pricing financial assets. If UST securities are trading at 3%, all other fixed-income securities with the same characteristics will trade at some price higher than 3%. It is assumed that there is no borrower with better credit than the United States.

Measures of risk can be based on metrics such as debt ratios and price volatility. A greater leverage or price volatility leads to a greater risk of either the principal and/or the interest not being paid back. Risk is synonymous with return probabilities, as well. Investments that offer the possibility of making greater returns are priced higher, even if that possibility is slim. A higher level of risk associated with an investment means a higher possible return. A downside to owning UST securities is that, due to the lower yield, the interest payments (an investor's income) will be lower.

> **Article Sources**
>
> 1.  U.S. Department of Treasury. "[Bureaus](https://home.treasury.gov/about/bureaus)." Accessed Jan. 21, 2021.
>     
> 2.  Treasury Direct. "[Treasury Bills](https://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htm)." Accessed Jan. 21, 2021.
>     
> 3.  Treasury Direct. "[Floating Rate Notes (FRNs)](https://www.treasurydirect.gov/indiv/products/prod_frns_glance.htm)." Accessed Jan. 21, 2021.
>     
> 4.  U.S. Senate. "[First Cabinet Confirmation](https://www.senate.gov/about/powers-procedures/nominations/first-cabinet-confirmation.htm)." Accessed Jan. 21, 2021.