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Understanding Treasury Securities – Insights from 1-Month T-Bill to 30-Year T-Bond

Treasury securities are essentially IOUs issued by the U.S. Department of the Treasury. When you buy a treasury security, you're lending money to the government. In return, the government promises to pay you back with interest after a specified period.



Treasury securities serve as an essential tool for the U.S. government to manage its financial obligations, regulate the economy, and provide a risk-free investment option to the public.


One of the primary reasons the government issues Treasury securities is to finance budget deficits. If government expenditures exceed revenues (primarily from taxes), the difference is funded by issuing these securities. As old debt matures, the government may need to issue new securities to refinance the principal of old ones.


Treasury securities play a pivotal role in the open market operations of the Federal Reserve, the central bank of the US. By buying or selling these securities in the open market, the Fed can influence the amount of money in the economy and steer short-term interest rates. Treasury securities are considered one of the safest investments because they are backed by the "full faith and credit" of the U.S. government. They offer a risk-free rate that many other investments are benchmarked against.


TMUBMUSD01Y refers to the symbol for the 1-Year U.S. Treasury Bill. TMUBMUSD refers to U.S. Treasury Bills. 01Y specifies the 1-Year duration. TMUBMUSD followed by a duration (for example, 01M or 30Y) represents a specific U.S. Treasury security's duration indicating the maturity of the security.


  • Treasury Bills: often called T-bills, are short-term securities that mature in one year or less from their issue date. The 1-Year T-bill (TMUBMUSD01Y) yield represents the return an investor will receive by holding the bill for a year until maturity and can serve as an important benchmark in the financial markets, providing an indication of short-term interest rate trends and overall economic conditions.

(they are sold at a discount and do not pay regular interest. Instead, the profit is the difference between the purchase price and the value at maturity.)


  • Treasury Notes: often called T-notes, are intermediate-term securities (TMUBMUSD05Y) that mature in five years from their issue date. The 5-Year T-note yield represents the return an investor will receive by holding the note for 5 years until maturity and can serve as an important benchmark in the financial markets, providing an indication of intermediate-term (or medium-term) interest rate trends and overall economic conditions.

(these come with a fixed interest rate and pay interest every six months.)


  • Treasury Bonds: often called T-bonds, are long-term securities (TMUBMUSD30Y) that mature in thirty years from their issue date. The 30-Year T-bond yield represents the return an investor will receive by holding the bond for 30 years until maturity and can serve as an important benchmark in the financial markets, providing an indication of long-term interest rate trends and overall economic conditions.

(these come with a fixed interest rate and pay interest every six months.)


  • Treasury Inflation-Protected Securities: commonly called TIPS, are a unique type of Treasury security specifically designed to help investors protect against inflation. Unlike traditional Treasury bonds, the principal of TIPS is adjusted by the U.S. Consumer Price Index (CPI), ensuring that the purchasing power of the invested capital remains largely unaffected by inflation over the investment's life.

(interest on TIPS is fixed; however, because the principal can adjust with inflation or deflation, the semiannual interest payments can vary in amount. If inflation rises, the principal of TIPS increases, and so does the semiannual interest payment. Conversely, in deflationary environments, the principal and the interest payment can decrease.)


  • Treasury Floating Rate Notes: commonly known as FRNs, are a distinctive category of Treasury security that features an interest rate payment that adjusts over time based on reference rates. Specifically, the interest rate on FRNs is tied to the most recent 13-week Treasury bill auction high rate, ensuring that the return on these notes remains relatively in line with current market conditions.Unlike fixed-rate Treasury securities, where the interest payment remains constant throughout the security's life, FRNs provide periodic interest payments that can fluctuate. This dynamic mechanism offers protection to investors against short-term interest rate volatility, ensuring that the yield on their FRN investments remains more consistent with prevailing market rates.


Treasury securities are closely watched by economists, policymakers, and investors as they can provide insights into market expectations about future economic conditions and Federal Reserve monetary policy actions.

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