What factors make Treasury securities attractive for investors?

Treasury securities are attractive to investors because they are backed by the full faith and credit of the United States government, are offered in a wide range of maturities, and are exempt from state and local taxes. In addition, most of the securities offered to the public are marketable, meaning they can be resold. A small portion of securities are nonmarketable, meaning they are registered to the owner and cannot be sold in the financial market. U.S. Savings Bonds are an example.

A key reason investors purchase Treasury securities is because they are liquid—that is, investors can easily trade the security because there are many people interested in buying and selling at any given time. Treasury securities accounted for about half or more of the trading volume in U.S. bond markets between 2000 and 2012, according to statistics from an association of securities firms, banks and asset managers. In 2012 daily trading volume in Treasury securities averaged almost $520 billion, compared to over $800 billion in total trading in U.S. bond markets. Trading volume of Treasury securities remained robust during the financial crisis in 2008 and 2009 when investors were generally uncertain about the financial condition and solvency of financial entities. Treasury securities were viewed as a "safe haven" investment.

Source: GAO analysis of data from the Securities Industry and Financial Markets Association (SIFMA).

Notes: The data refers to primary dealer activity for Treasury securities. Chart excludes non-agency MBS and ABS (mortgage-backed securities and asset-backed securities), each of which totaled about $6 billion in 2011 and 2012. The federal agency securities category includes securities issued by both federal agencies (such as the Tennessee Valley Authority) and government-sponsored enterprises (such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks).

Average Daily Trading Volume in U.S. Bond Markets data: txt pdf