Types of Treasury Market Instruments

Most bonds you'll come across have been issued by one of three groups: governments, state and local governments or corporations. In general, fixed income securities are classified according to the length of time before maturity. The bonds issued by the U.S. government are called Treasuries. They're grouped in three categories.

• U.S. Treasury bills -- maturities from 90 days to one year
• U.S. Treasury notes -- maturities of more than one year to 10 years
• U.S. Treasury bonds -- maturities of more than 10 years. (The government announced in fall 2001 that it will no longer issue 30-year bonds.)

U.S. Treasury Bills
T-Bills as they are commonly referred as, are short-term instruments with maturities of no more than one year. They fill the investment needs similar to money market funds. The Treasury bill market is highly liquid; investors can quickly convert bills to cash. Treasury bills function like zero-coupon bonds. Investors buy bills at a discount from the par, or face, value and then receive the full amount when the bill matures.

U.S. Treasury Notes
T-notes are intermediary to long-term investments. T-notes earn and pay a fixed rate of interest every six months until maturity. Fixed-principal notes are issued typically in terms of two, three, five, and ten years.

U.S. Treasury Bonds
T-Bonds are long-term investments, their terms cover maturities more than ten years. Even though the U.S. Treasury Department suspended 30 year bond issuance on October 31, 2001, they have now been reinstated. Interest is paid semi-annually.

Treasury Securities at a Glance