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Treasuries are debt obligations issued and backed by the full faith and credit of the U.S. government. Because they are considered to have low credit or default risk, they generally offer lower yields relative to other bonds.
Newly issued Treasuries can be purchased at auctions held by the government, while previously issued bonds can be purchased on the secondary market. Both types of orders can be placed through Fidelity.*
|Treasury||Minimum denomination||Sold at||Maturity||Interest payments|
|U.S. Treasury bills||$1,000||Discount||4-, 13-, 26-, and 52-week||Interest and principal paid at maturity|
|U.S. Treasury notes||$1,000||Coupon||2-, 3-, 5-, 7-, and 10-year||Interest paid semi-annually, principal at maturity|
|U.S. Treasury bonds||$1,000||Coupon||30-year||Interest paid semi-annually, principal at maturity|
|Treasury inflation-protected securities (TIPS)||$1,000||Coupon||5-, 10-, and 30-year||Interest paid semi-annually, principal redeemed at the greater of their inflation-adjusted principal amount or the original principal amount|
|U.S. Treasury zero-coupon bonds||$1,000||Discount||> 10 years||Interest and principal paid at maturity|
|Treasury STRIPS||$1,000||Discount||6 months to 30 years||Interest and principal paid at maturity|
Investors in Treasury notes (which have shorter-term maturities, from 1 to 10 years) and Treasury bonds (which have maturities of up to 30 years) receive interest payments, known as coupons, on their investment. The coupon rate is fixed at the time of issuance and is paid every six months.
Other Treasury securities, such as Treasury bills (which have maturities of one year or less) or zero-coupon bonds, do not pay a regular coupon. Instead, they are sold at a discount to their face (or par) value; investors receive the full face value at maturity. These securities are known as Original Issue Discount (OID) bonds, since the difference between the discounted price at issuance and the face value at maturity represents the total interest paid in one lump sum.
the percentage of return an investor receives based on the amount invested or on the current market value of holdings; it is expressed as an annual percentage rate; yield stated is the yield to worst — the yield if the worst possible bond repayment takes place, reflecting the lower of the yield to maturity or the yield to call based on the previous close
a criteria used to evaluate the creditworthiness, or risk of default, of an individual fixed-income security; generally expressed through ratings provided by one of the credit ratings agencies
a security distribution system in which the price is set, based on auction bids, at the lowest level that will raise the requisite funds
a market where securities are bought and sold between investors, as opposed to investors purchasing securities directly from the issuers; secondary market activity generally takes place on a major exchange, such as the New York Stock Exchange, or on electronic communications networks (ECNs)
the amount below the stated 'face' or par value when a fixed-income security (e.g. a bond) is bought or sold; for example, if a bond's face value is $1,000 and it sells for $900, it was sold at a discount
an independent company that provides investors with market intelligence in the form of credit ratings, indices, investment research and risk evaluations and solutions
the amount paid by a borrower to a creditor, or bondholder, as compensation for the use of borrowed money
the stated value of an investment at maturity; the face value for a corporate bond is typically $1,000; also known as par value or par amount
the date on which the principal amount of a fixed income security is scheduled to become due and payable, typically along with any final coupon payment. It is also a list of the maturity dates on which individual bonds issued as part of a new issue municipal bond offering will mature
the difference between the stated redemption price at maturity (if greater than one year) and the issue price of a fixed-income security attributable to the selected tax year
a bond where no periodic interest payments are made; the investor purchases the bond at a discounted price and receives one payment at maturity that usually includes interest; they have higher price volatility than coupon bonds as a result of interest rate changes
occurs when a bond issuer fails to make either an interest payment or principal repayment on its bonds as they come due, or fails to meet some other provision of the bond indenture
the risk that the issuer of a fixed-income security may not be able to make regularly scheduled interest payments or repay the principal at maturity
the annual rate, expressed as a percentage of principal, payable for use of borrowed money
a type of Treasury note that adjusts for inflation by providing inflation compensation in addition to the stated coupon the inflation component affecting the bond's principal is calculated based on the Consumer Price Index (CPI), adjusting it upwards for inflation or downwards for deflation
Gain a deeper understanding of fixed income and bonds.View all fixed income topics.