Treasury Market
What it is:
How it works/Example:
The U.S. Department of the Treasury has created a website, TreasuryDirect (click here for our guide on how to use TreasuryDirect, and here to visit the site) where it sells its debt instruments via a Dutch auction.
In 2009, the Treasury conducted 280 auctions, raising approximately $8.6 trillion.
Why it matters:
The market for U.S. Treasury instruments is a very important factor in determining market conditions. These instruments are seen as virtually risk-free, since investors assume a United States debt default is highly unlikely. The interest rates on Treasury debt sets the baseline risk-free rate that almost all other interest rates (corporate bond yields, mortgage rates, credit card rates, etc.) is built on. Both the global debt market and the global stock market watch the Treasury market very closely.