Syndicate
Public Treasury Securities
All the types of securities issued by the public treasury have certain common characteristics: immediate negotiation, excellent liquidity and absolute security and solvency from part of the United States Government.
The difference that sometimes exists among the offered prices and the demands of treasury bonds and debentures is proving that there is an active secondary market. The costs of the operation and, thus, the costs of brokerage, are relatively low.
Maybe, the most important characteristic of the securities of public debt is the tributary extension that they enjoy with respect to the rent taxing from Municipal and State governments; advantage that makes them more attractive than most conventional bank certificates, that are subject to these kind of taxes.
A significant difference between the treasury bills and the treasury notes and bonds rests on the refunding terms. The bonds (treasury notes) have a term of 1 to 10 years, while the debentures (treasury bonds) are usually issued with terms from 10 to 30 years.
Due to their longer life, the notes and bonds are more inclined than bills to experiment strong variations before any change on the types of interest.
The treasury notes and bonds usually require of a minimum investment of 5,000 dollars if the expiration is from 1 to 5 years, and of 1,000 dollars if they are of a longer term.
The casting of the coupon zero securities has permitted the small investor to easily place its money on this type of securities. They are simply securities that are sold to the investor completely “naked” that is, stripped from all their coupons (thus the name of stripped securities). Since one can calculate in advance the real money one will receive at its expiration, they are specially indicated for long-term goals as, for example, to fund your retirement of to pay for the studies of your sons.
As an investor, you should declare annually the interests that come from this reason; the bonds and debentures without coupon are considered the most appropriate for the Keogh plan (defined contribution retirement plans) and for the IRA accounts (Individual Retirement Account).
The most modern public debt securities are within reach of the average investor, they are the treasury inflation-protection securities (tips), that have a fixed nominal value, a type of interest that is also fixed and it pays interests every six months. However, the principal is corrected upwards or downwards depending on the price consumption index. At its expiration, the investor receives the nominal value or this value plus the additional increased adjustments due to the inflation.