Treasury bonds are issued by state and local governments

Treasury bonds are issued by state and local governments.

True

False

The correct answer and explanation is:

Answer: False

Explanation:

Treasury bonds are not issued by state and local governments. They are issued by the federal government of the United States through the U.S. Department of the Treasury.

Here’s a detailed explanation:

1. What Are Treasury Bonds?
   Treasury bonds (T-bonds) are long-term debt securities issued by the federal government to finance government spending and obligations. They typically have maturities of 20 or 30 years and pay interest semi-annually. Because they are backed by the “full faith and credit” of the U.S. government, they are considered one of the safest investments.
2. Issuers of Treasury Bonds:
   Treasury bonds, along with Treasury bills (short-term) and Treasury notes (medium-term), are all issued by the U.S. Department of the Treasury at the federal level. This means that only the federal government can issue these securities.
3. State and Local Government Bonds:
   State and local governments do issue bonds, but these are called municipal bonds (munis), not Treasury bonds. Municipal bonds are debt securities issued by states, cities, counties, and other local government entities to finance public projects like building schools, highways, or hospitals.
4. Differences Between Treasury Bonds and Municipal Bonds:

• Issuer: Treasury bonds = U.S. federal government; municipal bonds = state or local governments.
• Tax Treatment: Interest earned on Treasury bonds is subject to federal income tax but exempt from state and local taxes. Municipal bonds often offer interest exempt from federal income tax and sometimes state/local taxes if the investor resides in the issuing state.
• Risk: Treasury bonds are backed by the federal government and considered virtually risk-free in terms of default. Municipal bonds carry varying levels of risk depending on the financial health of the issuing municipality.

1. Summary:
   The statement “Treasury bonds are issued by state and local governments” is false because Treasury bonds are exclusively issued by the U.S. federal government. State and local governments issue their own debt instruments known as municipal bonds.