Treasury Marketables Factsheet
U.S. Treasury Securities
U.S. Treasury securities are debt instruments issued by the U.S. Treasury to raise the money needed to operate the federal government and refinance its debt. Treasury securities fall into two categories – marketable and non-marketable.
After original issue by the Treasury, marketable securities can be bought and sold in the financial marketplace, and ownership is transferable. Marketable securities include Treasury bills, notes, bonds and Treasury Inflation-Protected Securities (TIPS).
Non-marketable securities, such as U.S. Savings Bonds, are non-transferable securities issued by the government and registered to the owner. They cannot be sold in the financial market, but they can be redeemed at any time after they've been held for one year.
Purchasing Marketable Securities
Marketable securities can be purchased at original issue or on the secondary market for as little as $100. At original issue, Treasury sells new securities to the public using an auction process. To participate in an auction, you can place a bid directly with the Treasury using TreasuryDirect or bid through a bank or broker. Previously issued securities are bought and sold on the secondary market. To learn more about purchasing marketable securities through Treasury auctions or on the secondary market, visit www.treasurydirect.gov.
Types of Marketable Securities
Treasury bills (or T-bills) are short-term securities that mature in one year or less from their issue date. T-bills are purchased for a discounted price, and when they mature investors receive the full face value amount. Treasury bills are sold in 4-week, 13-week, 26-week, and 52-week maturities in TreasuryDirect and through banks and brokers. A shorter-term bill, a cash management bill, can be purchased only through banks and brokers. The maximum purchase amount for Treasury bills is $5 million for non-competitive bids and 35 percent of the offering amount for competitive bids.
Treasury Notes and Bonds
Treasury notes and bonds pay a fixed rate of interest every six months until the security matures. At maturity, the Treasury pays you the principal. Treasury notes are short-term investments that have a term of more than one year and up to 10 years. Treasury notes are offered in 2-, 3-, 5-, 7-, and 10-year maturities. Treasury bonds are long-term investments that mature more than 10 years from their issue date. The Treasury currently offers bonds in one marturity, 30 years. The maximum purchase amount for Treasury notes and Treasury bonds is $5 million for non-competitive bids and 35 percent of the offering amount for competitive bids.
Floating Rate Notes
Floating Rate Notes pay varying amounts of interest quarterly until maturity. Interest payments rise and fall based on discount rates in auctions of 13-week Treasury bills. Floating Rate Notes currently are issued for a term of two years. The maximum purchase amount is $5 million for non-competitive bids and 35 percent of the offering amount for competitive bids.
Treasury Inflation-Protected Securities, commonly called TIPS, are a special type of marketable Treasury security since their value is linked to the inflation rate. Every six months, the principal value of inflation-indexed securities is adjusted to reflect inflation. Treasury adjusts the principal value based on the Consumer Price Index. TIPS are sold in terms of 5, 10 and 30 years. When you own TIPS, you receive fixed-rate interest payments every six months based on the inflation-adjusted principal. At maturity, Treasury will redeem the security at its inflation-adjusted principal amount or its original par value whichever is greater. The maximum purchase amount for TIPS is $5 million for non-competitive bids and 35 percent of the offering amount for competitive bids.
Also known as zero-coupon securities, STRIPS are Treasury securities that don’t make periodic interest payments. Market participants create STRIPS by separating the interest and principal parts of a Treasury note or bond. STRIPS can only be bought and sold through a financial institution, broker, or dealer and held in the commercial book-entry system. For more information, contact your broker or dealer.