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

Related Articles
  1. Investing

    What's a Treasury Note?

    A treasury note is a U.S. government debt security that offers a fixed interest rate and a maturity date that ranges between one and 10 years.
  2. Trading

    Sizing A Futures Trade Using Average True Range

    Futures trading is risky business, so it's crucial that traders' positions match the level of risk they are willing to bear.
  3. Investing

    The Basics Of The T-Bill

    The U.S. government has two primary methods of raising capital. One is by taxing individuals, businesses, trusts and estates; and the other is by issuing fixed-income securities that are backed ...
  4. Investing

    What are Treasury STRIPS?

    STRIPS is an acronym that stands for Separate Trading of Registered Interest and Principal Securities.
  5. Investing

    The Importance Of U.S. Treasury Rates

    U.S. Treasury bond interest rates affect more than just bondholders! It impacts the day to day lives of all consumers.
  6. Investing

    MCLOX: BlackRock's Fund That Invests in Stocks & Bonds

    Learn about the BlackRock Global Allocation Fund Investor C Shares mutual fund, its portfolio makeup, and read an analysis of the fund's top five holdings.
  7. Investing

    These 3 ETFs Are Safer than Cash (SHY, IEI)

    Learn how investors wanting to safeguard their principals may consider ETFs based on U.S. Treasurys; these securities are viewed as the ultimate safe havens.
  8. Investing

    Understanding Treasury Yield

    Treasury yield refers to the return on an investment in a U.S. government debt obligation, such as a bill, note or bond.
  9. Investing

    Why You Should Stick with Stocks over the Long Term

    Over the long term, it pays to stick with stocks, despite the inevitable bouts of volatility that wrack stock markets from time to time.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center