The U.S. Department of the Treasury offers several types of securities that serve as federal government debt instruments, allowing investors to support government activities while receiving interest income. The primary types of Treasury securities include Treasury bills, Treasury notes, Treasury bonds, Treasury inflation-protected securities, and Treasury floating rate notes.
Treasury bills, often referred to as T-bills, are short-term securities that are issued with maturities ranging from a few days to one year. They do not pay interest in the traditional sense; instead, they are sold at a discount, and the investor receives the full face value at maturity. The difference between the purchase price and the face value reflects the investor's earnings.
Treasury notes, commonly known as T-notes, have maturities that typically range from two to ten years. They pay a fixed interest rate every six months until maturity, at which point the investor receives the principal amount.
Treasury bonds, or T-bonds, are long-term securities with maturities greater than ten years, generally up to thirty years. Similar to T-notes, they pay a fixed interest rate semi-annually, providing a steady stream of income over the life of the bond.
Treasury inflation-protected securities, known as TIPS, are designed to protect against inflation. They offer a fixed interest rate, but the principal amount is adjusted based on changes in the Consumer Price Index. This means that as inflation rises, the principal is increased, thus providing higher interest payments.
Lastly, Treasury floating rate notes, or T-FLOATs, have coupons that adjust based on changes in short-term interest rates, typically linked to the rate of three-month Treasury bills. This feature allows investors to benefit from rising interest rates.
These various Treasury securities provide investors with options tailored to their investment horizon and risk tolerance. For more details regarding specific securities and the latest offerings, it is advisable to visit the Treasury's official web page, where information is comprehensively presented.