Treasury Business


Overview

The U.S. Treasury periodically needs to borrow money to finance the operation of the government. When the Treasury needs to borrow money it issues instruments called bills, notes or bonds, each of which are basically nothing more than an “I owe you.”

All Treasury instruments also have defined maturity ranges. In addition, each Treasury instrument has a certain denomination attached to it. For example, a Treasury bill, or “T-bill,” is a short-term instrument that’s worth $1,000 and matures within a year.

U.S. Treasury securities—such as bills, notes and bonds are debt obligations of the U.S. government. When you buy a U.S. Treasury security, you are lending money to the federal government for a specified period of time.

How it work

Treasury instruments are issued through an auction process. T-bills, which are short-term in nature, are mostly auctioned on Mondays. Four-week T-bills, meaning they mature in 4 weeks, are auctioned by the Treasury on Tuesdays. Treasury notes and bonds are auctioned as needed and pay face value at their maturity date. All T-notes and T-bonds pay a stated interest rate on a semi-annual basis. T-bills are sold at a discounted rate; with a typical $9,700 1-year T-bill paying about $10,000 at maturity.

The US Treasury Department periodically borrows money and issues IOUs in the form of bills, notes, or bonds (“Treasuries”). The differences are in their maturities and denominations:

Bill Note Bond
Maturity up to 1 year 1–10 years 10–30/40 years
Denomination $1,000 $1,000 $1,000
Minimum purchase $1,000 $1,000 $1,000

How to buy

All standard Treasury instruments are available for sale to the general public through the U.S. Treasury’s TreasuryDirect program. Treasury instruments sold through the TreasuryDirect program come with no fee or a low fee, depending on the instrument purchased. You can also purchase U.S. Treasury instruments through banks and brokers, though they’ll typically charge a commission fee. If you buy Treasury instruments through banks or brokerages, normally you also have to open an account.

Payment & Rewards

All Treasury instruments are negotiable, meaning they can be sold at any time at a price you negotiate for with a willing buyer. “Treasuries,” as Treasury instruments are usually called, can also be pledged as collateral for things such as loans. Treasury instruments purchased through the TreasuryDirect program, though, can’t be pledged as collateral in some cases. Treasury instruments are also considered the safest investment in the United States because they’re backed by the full faith and credit of the nation itself.

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One thought on “Treasury Business

  1. The amount of marketable U.S. Treasury securities is huge, with $7.3 trillion in outstanding bills, notes and bonds as of December 31, 2009*. The Treasury market is one of the world’s most liquid debt markets, meaning it is one where pricing, executing and settling a trade is very efficient and thus inexpensive due, in part, to very tight bid/ask spreads. The average daily trading volume in U.S. Treasuries was $409.8 billion in 2009** and these securities trade virtually 24 hours a day with the U.S. primary dealers making live and continuous markets in these securities each business day via trading desks in cities across the globe like Tokyo, London, and New York.

    Monthly Statement of the Public Debt (MSPD) and Downloadable Files
    feed://www.treasurydirect.gov/rss/mspd.xml

    MONTHLY STATEMENT OF THE PUBLIC DEBT
    OF THE UNITED STATES
    SEPTEMBER 30, 2011
    http://www.treasurydirect.gov/govt/reports/pd/mspd/2011/opds092011.prn

    Important FAQ
    http://www.treasurydirect.gov/govt/resources/faq/faq_publicdebt.htm

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