Chap6Notes - U.S Treasury and Agency Securities Securities...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 U.S. Treasury and Agency Securities Securities issued by U.S. Treasury. To borrow money to finance government spending in excess of tax revenue – Budget deficit. The Treasury Debt market is the most active and liquid securities market in the world… Why are Treasury Securities So important? Large amount outstanding. U.S. Treasury is the largest single issuer of debt in the world. Very active trading. High degree of liquidity and the Lowest bid-ask spread of any bond market sector. Result b Treasury yields serve as the benchmark interest rate in corporate, municipal and Mortgage markets. U.S. Treasury Securities Treasury bills short term debt obligations of the U.S. Treasury, sold at a discount and maturing in less than 365 days. $1,000 minimum denomination 13 and 26 weeks bills offered weekly. The 52-weeks bills are not currently issued Bids can be made on competitive or noncompetitive basis. Individuals can purchase T-bills directly via the Internet. (Treasury direct) Prices are inferred from yields quoted on a bank discount basis.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 U.S. Treasury Securities -- Continued Treasury notes Coupon Paying obligations of the U.S. Treasury. Time to maturity at issue is two, three, five or ten years. Two year and five year notes are issued monthly at the last day of each month Treasury bonds Coupon paying obligations of the U.S. Treasury. Time to maturity at issue greater than 10 years – 15 & 30 years. New issues of the 30-year bond were suspended in 2001; but were brought back in 2005! U.S. Treasury Securities -- Continued Treasury Inflation Protected Securities. coupon paying obligations of the U.S. Treasury that provide a cash flow stream adjusted for actual inflation. The coupon payment on a TIPS bond is a fixed percentage of the inflation-adjusted principal. The principal value of TIPS is adjusted for actual inflation. The amount of the adjustment is treated as taxable income. TIPS maintain their purchasing power and protect
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 7

Chap6Notes - U.S Treasury and Agency Securities Securities...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online