What Is the U.S. Treasury?: Functions & Importance

By Kristi Waterworth – Updated Jul 5, 2025 at 6:01 PM

Key Points

U.S. Treasury influences global economy, manages national finances, and ensures financial law enforcement.
Treasury securities like bonds, bills, and notes are stable investments, key to portfolio diversification.
Inverted yield curves in Treasury securities suggest potential economic downturns, demanding investor vigilance.

Whether you're an investor or a student of government history, the U.S. Treasury is an incredibly interesting structure with wide-ranging influence over your particular areas of interest. Find out more about how it started, where it is now, and how it affects investors.

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The U.S. Treasury building. — Image source: Getty Images.

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Treasury Bills (T-Bills)

A short-term debt issued and backed by the government, offering a low-risk investment with maturity typically under a year.

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Treasury bonds, bills, and notes themselves are really useful for investors looking to grow their holdings without risking them. However, they also work together to create strong economic indicators when compared to one another.

For example, the inverted yield curve has been considered a sign of impending recession. You can see the yield curve by comparing either the interest rates of 10-year Treasury bonds to two-year Treasury bonds or 10-year Treasury bonds to three-month Treasury bills. Academics tend to compare bonds to bills, but traders may prefer bonds to bonds.

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Understanding Treasury Bonds and Other Investments

Issued by the U.S. government to raise money, T-bonds should have a place in your portfolio.

How to Calculate the Price of a Treasury Bill

Discover the security of Treasury bills, master the easy price calculation, and understand interest integration.

How to Calculate the Percentage Return of a Treasury Bill

A T-bill is a short-term government debt security that doesn't pay interest, so calculating its return is slightly different.

A History of U.S. Stock Market Crashes

What goes up must come down. Here's a look at the biggest stock market crashes.

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However you slice it, when the long-term debt's yield is smaller than the short-term debt's yield, it's generally considered a sign of instability on the horizon. Although the yield curve has been inverted since 2022 -- which should have predicted a recession 12 to 18 months later -- we're still waiting for that incoming recession to hit. The inverted yield curve does not guarantee problems to come, but it means we should all be paying attention.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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