Treasury Investments/Securities - Treasury Bills, Notes, Bonds,
Savings Bonds, TIPS And STRIPS
by Mike Singh
Treasury investments, or securities, are bonds issued by the
Department of Treasury. In basic concept, they are the many
different forms of loans that the people of the U.S. give to the
government. There are four types of treasury securities:
1. Treasury bills or T-bills: these are securities that have a
length of maturity that is less than one year (13, 26 or 52
weeks). Therefore, they are offered in a discounted form.
Instead of offering interest along with the repayment amount,
purchasers are offered more money at the time of maturity than
they paid for the bill to begin with.
2. Treasury notes: This kind of security has a longer maturity
date of 2, 5, or ten years, and they are sold in $1,000
3. Treasury bonds: With a long maturity date of 10-30 years,
these securities can be helpful for investors who need to build
a long-term strategy. Treasury bonds in paper form can be
converted to electronic form.
4. Savings bonds: These securities differ from others in that
they are registered to one person only and therefore cannot be
actively traded. Also, they are the most affordable kind of
treasury investment, as investors can purchase them for as low
What are the not-so-popular kinds of treasury investments?
In addition to these kinds of treasury investments or
securities, the government also sells Patriot bonds, and STRIPS
(Separate Trading of Registered Interest and Principal
Securities). These investments separate the interest and
principal parts of the security; they have the structure of a
T-bill and mature between 1-30 years after issuance.
They are also the stripped version of TIPS (Treasury
Inflation-Protected Securities). As zero coupon bonds, they do
not pay interest payments. I Bonds and TIPS complete the wide
variety of Treasury Investments. These bonds are purported to
keep up with inflation, with the interest rate or principal
balance adjusting with the nation's economy.
What are the advantages of investing in the treasury securities?
Except for savings bonds, each of these is traded extensively on
the market and can be easily converted to cash. They are backed
by the Federal government and are usually considered low or
no-risk investments. The interest on these "loans" is not
taxable on the local or state level.
These securities are registered. This simply means that when
these are purchased, the name that these are registered to is
the sole owner. So, if you lose them these can easily be
replaced if misplaced.
How can somebody invest in savings bonds?
In the past savings bonds were issued on paper. Since October
2002, the US treasury went high-tech and started to offer an
online service TreasuryDirect. So, these purchases can be made
online at your convenience.
About the author:
you will find articles on tax exempt
bond funds and cana
dian savings bonds.