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Information provided by the US Department of Homeland Security regarding potential terrorist attacks significantly affects US Treasury securities markets. When the government announces heightened terror alert levels, investors' perceptions of risk increase and investors purchase 1-month and 1-year Treasury bills and 3-year, 5-year, 7-year, and 10-year US Treasuries in a "flight-to-quality" episode. Partial anticipation of increased threat level announcements is stronger than the anticipation of announcements regarding the federal funds rate during the 10 days prior to an announcement.

The systematic importance of US Treasuries for the global financial market stems from their attribute of fundamental collateral. This paper attempts to use the concept of fundamental collateral, as well as its basic features and functions, to explain how US Treasuries have strengthened the international status of the US dollar, and examines the prospects of a diversifying global fundamental collateral market.