Why are treasury bonds considered to be risk-free?

Treasury bonds are considered to be risk-free primarily because they are backed by the full faith and credit of the U.S. government. This backing means that the government is committed to fulfilling its debt obligations, making the likelihood of default extremely low. Investors view treasury bonds as a safe haven in times of economic uncertainty because the U.S. government has a strong track record of honoring its debt, which instills confidence among bondholders.

The other options do not contribute to the characterization of treasury bonds as risk-free. For instance, while treasury bonds do have an interest rate (the coupon rate), this is not the defining feature that makes them risk-free. Additionally, treasury bonds are long-term investments, often issued with maturities ranging from 10 to 30 years, rather than being short-term. Finally, they can be issued in various denominations, and the size of the denomination does not impact their risk profile. The essential point is the U.S. government's backing, which reassures investors of the bonds' safety and reliability.