Treasury Notes and Bonds

<body onLoad="MM_checkPlugin('Shockwave Flash','','http://www.riskglossary.com/default_nofl.htm',false);return document.MM_returnValue" stylesrc="../_private/template.htm" bgcolor="#FFFFFF" link="#669933" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table1"> <tr> <td width="740"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" height="37" id="table2"> <tr> <td height="35" width="100%"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table3"> <tr> <td width="100%" align="left" valign="top"> <p class="header_gold">Treasury Notes and Bonds</td> <td width="45" align="right" valign="bottom"> <map name="FPMap6"> <area href="http://www.contingencyanalysis.com" shape="rect" coords="1, 0, 44, 11" target="_top"> </map> <img border="0" src="../images/home.gif" usemap="#FPMap6" width="45" height="12"></td> </tr> </table> </td> </tr> <tr> <td width="100%" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td width="0%" valign="top" bgcolor="#FFFFCC"> <table border="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" cellspacing="1" id="table4"> <tr> <td width="0%" align="left" valign="top"> <p class="header2_black">Explained:<br> <img border="0" src="../images/blank_1x100.gif" width="100" height="1"></td> <td width="0%" align="left" valign="top"><p class="word_list"> <a href="#Treasury notes">Treasury bond</a><p class="word_list"> <a href="#Treasury notes">Treasury note</a><br> <img border="0" src="../images/blank_1x160.gif" width="160" height="1"></td> <td width="100%" align="left" valign="top"><p class="word_list"> <br> <img border="0" src="../images/blank_1x160.gif" width="160" height="1"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111" width="310" align="right" id="table5"> <tr> <td align="right" width="9" height="14"></td> <td width="300" height="14"> <font size="2"> </font><font size="4"> </font></td> </tr> <tr> <td align="right" width="9"> </td> <td width="300"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> </tr> </table> <p class="body"><b><a name="Treasury notes">Treasury notes</a></b> and <b> <a name="Treasury bonds">Treasury bonds</a></b> are US <a href="../articles/treasury_securities.htm">Treasury securities</a> that have initial maturities greater than a year. All pay semi-annual <a href="../articles/coupon_bond.htm">coupons</a>, usually according to a schedule under which coupons are paid on anniversaries of the <a href="../articles/security.htm">security's</a> first issuance date. </p> <p class="body">Notes and bonds differ only in their initial maturities. Notes are issued with maturities up to ten years. Bonds have initial maturities greater than ten years. The Department of Treasury has issued standard 2-, 3-, 5- and 10-year notes and 15-, 20-, and 30-year bonds, but issuance of certain maturities is suspended for periods of time. In the past, the Department of Treasury issued some <a href="../articles/callable_bond.htm">callable</a> bonds, but it no longer does so. In 1995, the they auctioned one or more notes every month. The 30-year was the only bond being issued, and this was auctioned in January and July. </p> <p class="body">The Department of Treasury does not issue <a href="../articles/zero_coupon_bond.htm">zero-coupon</a> notes or bonds, but all Treasury notes and bonds are eligible for the Treasury's <a href="../articles/treasury_strips.htm">STRIPS</a> program.</p> <p class="body">The secondary market for notes and bonds is <a href="../articles/exchange_traded.htm">OTC</a>. It is a large, active, <a href="../articles/liquidity.htm">liquid</a> market. See the article <i> <a href="../articles/treasury_securities.htm">Treasury Securities</a></i> for more information.</p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="345" align="left" id="table6"> <tr> <td width="336"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> <td width="9"> </td> </tr> </table> <p class="body">By convention, note and bond prices are quoted based on a <a href="../articles/currency_codes.htm">USD</a> 100 <a href="../articles/par_value.htm">par value</a>. Prices can be expressed in decimal form, for example USD 101.32. An archaic convention of quoting prices in 32nds of a USD is also widely used. For example, if a bond is quoted at 101-14, this means that the bond's price is 101 and 14<font size="4">/</font>32, or USD 101.4375 per USD 100 of par value. A 64th can be added to the price with a plus sign, so 101-14+ means 101 and 14<font size="4">/</font>32 and 1/64. Eighths of a 32nd can be added to the price by appending an additional digit to the quote. For example, 101-143 indicates a price of 101 and 14/32 and 3/256. Unfortunately, a period often replaces the hyphen in this notation, so don't assume that a quote of 101.25 means 101 and 1<font size="4">/</font>4 USD. It very likely means 101 and 25<font size="4">/</font>32 USD. Notes and bonds may also be quoted according to their <a href="../articles/yield.htm">yield to maturity</a>.</p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table7"> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related Internal Links</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table8"> <tr> <td width="100%"> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/agency_securities.htm">agency security</a> A security issued by a US federal agency or government sponsored enterprise.</p> <p align="left" class="explanatory_text"> <img border="0" 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