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What are T-bills, T-notes and T-bonds

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What are T-bills, T-notes and T-bonds

Postby chicagotech » Sun Oct 22, 2017 2:32 pm

What are T-bills, T-notes and T-bonds?

Treasury bills (T-Bills), notes (T-Notes) and bonds (T-Bonds) are marketable securities that the U.S. government sells in order to pay off maturing debt and to raise the cash needed to run the federal government. T-bills are issued for a term of one year of less. T-bills are considered the world’s safest debt as they are backed by the full faith and credit of the United States government.

A treasury note is a marketable U.S. government debt security with a fixed interest rate and a maturity between one and 10 years. Treasury notes are available from the government with either a competitive or noncompetitive bid

Bonds represent debt obligations – and therefore are a form of borrowing. If a company issues a bond, the money they receive in return is a loan, and must be repaid over time. The good example is the mortgage on a home or a credit card payment.

What's the difference between bills, notes and bonds?

T-bills are short-term obligations issued with a term of one year or less, and because they are sold at a discount from face value, they do not pay interest before maturity. The interest is the difference between the purchase price and the price paid either at maturity (face value) or the price of the bill if sold prior to maturity.

Treasury notes and bonds, on the other hand, are securities that have a stated interest rate that is paid semi-annually until maturity. What makes notes and bonds different are the terms to maturity. Notes are issued in one-, three-, five-, seven- and 10-year terms. Conversely, bonds are long-term investments with terms of more than 10 years.
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