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Encyclopedia > Treasury bond

Treasury Securities are bonds issued by the U.S. Treasury. They are the debt finance instruments of the Federal government, and are often referred to as "treasuries." There are four types of treasury securities: Treasury Bills, Treasury Notes, Treasury Bonds, and Savings Bonds. All of the treasury securities besides Savings Bonds are very liquid. They are heavily traded on the secondary market. Dutch East India Company bond, issued in 1623. ... The United States Department of the Treasury is a Cabinet department, a treasury, of the United States government established by an Act of U.S. Congress in 1789 to manage the revenue of the United States government. ... Debt is that which is owed. ... Market liquidity is a business or economics term that refers to the ability to quickly buy or sell a particular item without causing a significant movement in the price. ... The secondary market (also called aftermarket) is the financial market for trading of securities that have already been issued in its initial private or public offering. ...

Contents

Treasury bill

Treasury bills (a.k.a. T-bill) mature in one year or less. They are zero-coupon bonds. They are sold at a discount of the par value to create a positive yield to maturity. Treasury bills are considered by many the most risk free investment. Treasury Bills are commonly issued with maturity dates of 91 days, 6 months, or 1 year. Zero-coupon bonds are bonds which do not pay interest payments (also known as coupon payments). ... Par value has several meanings depending on the context, whether used in the equities market, or in the bond markets, and partially also dependent on where in the world the par value term is used. ... Yield to maturity (YTM) is the internal rate of return on cash flow of a fixed income security, often bond, if the security were to be held until maturity. ...


Treasury note

Treasury notes (a.k.a. T-Note) mature between one and ten years. They have coupon payment every six months. There are two kinds of Treasury Notes. They are fixed principal and inflation-indexed Treasury notes. Inflation Indexed Notes adjust the principal for inflation. Treasury notes are commonly issued with maturities dates of 2, 3, 5 or 7 years. Inflation-indexed bonds are bonds whose principal and coupon are indexed to inflation, cutting out inflation risk. ...


The U.S. 10-year Treasury note has become the security most frequently quoted when discussing the performance of the government-bond market and is used to convey the market's take on longer-term macroeconomic expectations. It is also important to the U.S. mortgage market which uses the yield on the 10-year Treasury note as a basis for setting mortgage interest rates.


Treasury bond

Treasury bonds (a.k.a. T-Bonds) mature in more than ten years. They have coupon payment every six months like T-Notes. Treasury bonds are commonly issued with maturity dates of ten and thirty years. T-Bonds may be "stripped", separating the interest and principal portions of the security; these may then be sold separately (in units of $1000 face value) in the secondary market. The Treasury calls such securities STRIPS (a backronym for "Separate Trading of Registered Interest and Principal Securities"); the name derives from the notional practice of literally tearing the interest coupons off of (paper) securities. The secondary market for both STRIPS and unstripped bonds is highly liquid, so the yield on the most recent T-Bond offering was commonly used as a proxy for long-term interest rates in general. (This role has largely been taken over by the 10-year note, as the size and frequency of long-term bond issues declined significantly in the 1990s and early 2000s.) The secondary market (also called aftermarket) is the financial market for trading of securities that have already been issued in its initial private or public offering. ... Treasury Securities are bonds issued by the U.S. Treasury. ... A backronym or bacronym is a reverse acronym, that is, the words of the expanded term were chosen to fit the letters of the acronym. ... Events and trends Technology The World Wide Web was born at CERN Explosive growth of the Internet; decrease in the cost of computers and other technology Reduction in size and cost of mobile phones leads to a massive surge in their popularity Year 2000 problem (commonly known as Y2K) Microsoft... Major controversy over U.S. presidential election, 2000 September 11, 2001 Terrorist Attack on New Yorks World Trade Center and Virginias Pentagon killing over 3000 people. ...


The U.S. Federal government stopped issuing the well-known 30-year Treasury bonds (often called long-bonds) on October 31, 2001. As the U.S. government used its budget surpluses to pay down the Federal debt in the late 1990s, the 10-year Treasury note began to replace the 30-year Treasury bond as the general, most-followed metric of the U.S. bond market. However, the U.S. Treasury announced in May 2005 that due to a flattening of the yield curve (the difference between short-term bond yields and long-term bond yields is narrowing) and due to demand from pension funds and large, long-term institutional investors, the 30-year Treasury bond might be re-introduced in early 2006. This will bring the U.S. in line with Japan and other European governments issuing longer-dated maturities amid growing global demand from pension funds. (France is even offering a 50-year bond) A final decision by the U.S. Treasury will be announced in August 2005.


TIPS

Main article: Treasury Inflation-Protected Securities Treasury Inflation-Protected Securities (TIPS) are the inflation-indexed bonds issued by the U.S. Treasury. ...


Treasury Inflation-Protected Securities (TIPS) are the inflation indexed bonds issued by the U.S. Treasury. The principal and coupon are adjusted to the consumer price index, a common measure of inflation. Inflation-indexed bonds are bonds whose principal and coupon are indexed to inflation, cutting out inflation risk. ... The United States Department of the Treasury is a Cabinet department, a treasury, of the United States government established by an Act of U.S. Congress in 1789 to manage the revenue of the United States government. ... Consumer price index - Wikipedia /**/ @import /skins/monobook/IE50Fixes. ...


Savings bond

Savings bonds are nontransferable treasury securities. Although they cannot be traded on the secondary market, they can be cashed before their maturity date. The secondary market (also called aftermarket) is the financial market for trading of securities that have already been issued in its initial private or public offering. ...


See also

Government debt (public debt, national debt) is money owed by government, at any level (central government, federal government, national government, municipal government, local government, regional government). ... In finance, interest has three general definitions. ... Risk is the potential harm that may arise from some present process or from some future event. ...

External links

  • Bureau of the Public Debt : TreasuryDirect (http://www.publicdebt.treas.gov/sec/sectrdir.htm)
  • Bureau of the Public Debt : US Savings Bonds Online (http://www.publicdebt.treas.gov/sav/sav.htm)
  • Major Foreign Holders of Treasury Bonds (http://www.treas.gov/tic/mfh.txt)


 

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