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Treasury Securities are bonds issued by the U.S. Federal Reserve. They are debt finance instrument of the Federal government. There are four types of treasury securities. They are 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.
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 maturities dates of 91 days, 6 months, or 1 year.
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.
Treasury bond
Treasury bonds (a.k.a. T-Bond) 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.
TIPS
Main article: Treasury Inflation-Protected Securities
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.
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.
See also
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