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What are Treasury Securities?

By Jessica Hobby
Updated May 16, 2024
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Treasury securities include multiple types of securities that are issued by the United States government to help raise capital. Monies received by the U.S. government from the sale of Treasury securities help pay for the operation of the federal government. Additionally, the U.S. government uses these monies to pay off outstanding debts.

Treasury bills (T-bills), Treasury bonds (T-bonds), Treasury notes (T-notes), and Treasury Inflation Protected Securities (TIPS) are all forms of Treasury securities that are auctioned on secondary markets. A T-bill is a short-term security that is not callable. Investors are able to purchase T-bills that mature quarterly, biannually and yearly. T-bills that mature quarterly and biannually are auctioned on a weekly basis, while those that mature after a year are auctioned monthly.

T-bonds and T-notes are callable treasury securities that are issued monthly, quarterly and biannually. Those who invest in T-notes or T-bonds will receive an interest payment two times per year and their principal will be returned at the time of maturity. Maturity times for T-notes range between two and ten years, while the maturity time for a T-bond is more than ten years. In the event that a T-bond or T-note is called, the U.S. government is required to let investors know four months prior to their intended call date.

In order to protect themselves from inflation, investors may choose to buy TIPS. TIPS are similar to T-notes and T-bonds because they pay interest two times per year. Maturity times for TIPS are five, ten or 20 years. The U.S. government protects investors by adjusting the principle of these special Treasury securities to the Consumer Price Index (CPI).

U.S. savings bonds are the last kind of Treasury security issued by the U.S. government. While T-bills, T-notes, T-bonds and TIPS are transferable, savings bonds are only payable to the person who the bond was issued to. Savings bonds may be redeemed as early as one year after purchase and can earn interest up to 30 years.

U.S. Treasury securities are popular choices for investors because of their many features and benefits. Because U.S. Treasury securities are secured by the U.S. government, they are regarded to be extremely safe investments. Additionally, all of the securities are very easy to buy and sell, which helps them to be extremely liquid. Also, any interest income that is earned by investors who purchase U.S. Treasury securities is exempt from local and state taxes.

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Discussion Comments

By Veruca10 — On Jun 29, 2011

@KLR650 - I remember that. I was wondering why people wouldn't just leave their money in a bank or whatever, rather than buying T bills that didn't do much for them. I guess it's because banks only insure accounts up to so much, and after that you are out of luck if the bank fails. Treasury bills were a safer place to park large amounts of money.

That's a problem I'd like to have! "Gee, where am I going to put this 20 million dollars? I just can't decide".

By KLR650 — On Jun 28, 2011

@bigjim - I was thinking the same thing the other day. My grandparents bought me some bonds when I was a baby, and I used them to pay for part of my first car, a Ford Pinto (maybe I should have kept the bonds). I know you can still buy savings bonds, but it doesn't seem as common.

Now, other kinds of treasury securities you hear about all the time. With the stock situation being so volatile, people were flocking to buy those even when the rate went way down. There was a period a couple of years back when they were barely paying any interest at all, and still people bought them.

By bigjim — On Jun 28, 2011

I didn't know that savings bonds were a type of treasury bond. You don't hear about people buying them so much anymore. I remember when I was a kid, it was popular to buy them for grandchildren and other young relatives, so they would have the money with interest when they got into college or got married.

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