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Difference among Treasury bill, treasury note and treasury bonds investments - investment basics
There are quite some articles talking about treasury bonds investments. We do not intend to write a tutorial on bonds. One of the well written bonds tutorial can be found in
Investopedia in which we summarize the following points on the basic concepts of bond investments.
Differences among treasury bonds, treasury notes and treasury bills
Treasury bond is a marketable, fixed-interest U.S. Government debt security with a maturity over 10 years. Treasury bonds are usually issued with a minimum denomination of $1,000. The 30-year Treasury will generally pay a higher interest rate than shorter Treasuries to compensate for the additional risks inherent in the longer maturity.
Treasury note is a marketable, U.S. government debt security with a fixed interest rate and a maturity between one and 10 years. T-notes can be bought either directly from the US government or through a bank. When buying from the government you can either put in a competitive or noncompetitive bid. With a competitive bid you specify the yield you want; however, this does not mean your bid will be approved. With a noncompetitive bid is one where you accept whatever yield is determined at auction. T-notes are extremely popular investments as there is a large secondary market that adds to their liquidity. Interest payments on the notes are made every six months until maturity.
Treasury bill is a short term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations of $10,000 to $1 million and have maturities of three months (13 weeks), six months (26 weeks) and 12 months (52 weeks). T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments, the appreciation of the bond provides the return to the holder.
Bonds, notes and bills are all fixed-income securities classified by maturity. You can purchase most bonds through a brokerage or bank. If you are a US citizen, you can buy US government bonds through TreasuryDirect. Again, for simplicity reason, we use bonds as a general term to describe all treasuries with maturities over one year.
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