Which type of risk do Treasury bonds have, as they are guaranteed by the government?

Treasury bonds, being backed by the full faith and credit of the U.S. government, exhibit specific types of risk. One of the main risks associated with Treasury bonds is interest rate risk. This risk arises from the possibility that changes in interest rates will affect the bond's market value. When interest rates rise, the price of existing bonds typically falls, as new bonds may be issued at higher rates, making the older ones less attractive. Conversely, if interest rates fall, the value of existing bonds might rise.

While Treasury bonds are free from credit risk and default risk due to their government backing, they are still subject to market fluctuations and changing economic conditions that affect interest rates. This highlights the importance of understanding interest rate risk as it impacts the performance of these bonds in a portfolio.