The United State's Treasury issues various types of securities known as US Treasury securities. These securities are backed by full faith and credit of US government, hence, they are perceived to be credit risk-free.

How are they issued and traded?

Primary issue method: Sealed bid auctions on a regular cycle/single-price method. All the winning bidders are awarded securities at highest yield accepted by government (stop-out yield). The auction is generally announced many days before the auction takes place.

Secondary market:  Traded over-the-counter through a network of dealers who are always ready to buy and sell with a bid and ask price.

On-the-run Vs. Off-the-run Securities Issue

On-the-run refers to the most recently auctioned issue. The older sets of securities (auctioned earlier) are referred to as off-the run issue.

Types of Securities

The US Treasury issues three broad categories of securities, namely, fixed-principal securities, inflation-indexed securities, and treasury STRIPS.

Fixed-principal Securities