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Smart Bond Investing
Treasury Bills, Notes and Bonds |
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Treasuries Defined
| Treasury Bills |
Short-term securities that are non-interest bearing (zero-coupon) with maturities of only a few days (these are referred to as cash management bills), four weeks, 13 weeks or 26 weeks. Also called T-bills, you buy them at a discount to face value (par) and are paid the face value when they mature. Interest income is subject to federal income tax, but exempt from state and local income taxes. |
| Treasury Notes |
Fixed-principal securities issued with maturities of two, five and 10 years. Sometimes called T-Notes, interest is paid semiannually, with the principal paid when the note matures. Interest income is subject to federal income tax, but exempt from state and local income taxes. |
| Treasury Bonds |
Long-term, fixed-principal securities issued with a 30-year maturity. The Treasury Department stopped issuing Treasury bonds in October 2001, but brought back the 30-year bond in February 2006. Outstanding fixed-principal bonds have terms from 10 to 30 years. Interest is paid on a semiannual basis with the principal paid when the bond matures. Interest income is subject to federal income tax, but exempt from state and local income taxes. |
| You can learn more about Treasuries on the TreasuryDirect Web site. |
As safe as an investment in legitimate Treasury securities is, even the Treasury bond market has its share of scams. The Bureau of the Public Debt alerts investors to fraudulent schemes through a Web site called Frauds, Phonies, and Scams.
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