Bills In Depth 4-, 13-, 26- and 52-week
Treasury bills, or T-bills, are issued
at a discount from their face value. For example, you might pay $990
for a $1,000 bill. When the bill matures, you would be paid its face
Notes In Depth Treasury notes, or T-notes,
are issued in terms of 2, 5, and 10 years, and pay interest every six
months until they mature.
Bonds In Depth Treasury bonds are
issued in terms of 30 years and pay interest
every six months until they mature. When a Treasury bond matures, you
are paid its face value.
In Depth Treasury Inflation-Protected
Securities (TIPS) are marketable
securities whose principal is adjusted by changes in the Consumer Price
Index. With inflation (a rise in the index), the principal increases.
With a deflation (a drop in the index), the principal decreases.The
relationship between TIPS and the Consumer Price Index affects both the
sum you are paid when your TIPS matures and the amount of interest that
a TIPS pays you every six months. TIPS pay interest at a fixed rate.
Because the rate is applied to the adjusted principal, however,
interest payments can vary in amount from one period to the next. If
inflation occurs, the interest payment increases. In the event of
deflation, the interest payment decreases. At the maturity of a TIPS,
you receive the adjusted principal or the original principal, whichever
is greater. This provision protects you against deflation.
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