Treasury bonds are complicated by history. Presently, Treasury sells bonds at a discount, but until 2001 T-bonds were sold as fixed-principal securities, like T-notes are today. Still, many fixed-principal T-bonds have not matured and are still owned by investors. Furthermore, T-bills and T-notes are all electronic, but the older outstanding T-bonds exist as paper certificates while the more recently issued ones exist as electronic entries in accounts.

Even though T-bonds are no longer sold as fixed-principal securities, they still pay interest every six months until maturity. At maturity, the U.S. Treasury pays back the principal to the owner. The principal is a multiple of $10,000, (or an order of magnitude more than the T-bills or T-notes, whose par value is $1,000).

The following table summarizes our discussion on the various types of treasuries discussed above:


Types of Treasury Securities
Maturity State/ Local Federal Tax Par value Bid Interest-bearing
T-bill Year or less Tax-exempt Non-exempt $1,000 dollar no
T-note 2-10 yrs Tax-exempt Non-exempt $1,000 yield yes
T-bond More than 10 years Tax-exempt Non-exempt $10,000 Now dollar, pre-2002 yield yes


Once you have a handle on the topic of T-bonds, you can move on to STRIPS (Separate Trading of Registered Interest and Principal of Securities), which are debt securities created by stripping coupons from a T-bond.



Agency Bonds

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