The price at which the owner of an option can purchase call the underlying stock.
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Treasury bills or T-bills mature in one year or less. Like zero-coupon bonds , they do not pay interest prior to maturity; instead they are sold at a discount of the par value to create a positive yield to maturity. Regular weekly T-Bills are commonly issued with maturity dates of 28 days or 4 weeks, about a month , 91 days or 13 weeks, about 3 months , days or 26 weeks, about 6 months , and days or 52 weeks, about 1 year.
Treasury bills are sold by single-price auctions held weekly. Offering amounts for week and week bills are announced each Thursday for auction, usually at Offering amounts for 4-week bills are announced on Monday for auction the next day, Tuesday, usually at Offering amounts for week bills are announced every fourth Thursday for auction the next Tuesday, usually at Purchase orders at TreasuryDirect must be entered before Mature T-bills are also redeemed on each Thursday.
Banks and financial institutions, especially primary dealers , are the largest purchasers of T-bills. The week bill issued three months after a week bill is considered a re-opening of the week bill and is given the same CUSIP number. The 4-week bill issued two months after that and maturing on the same day is also considered a re-opening of the week bill and shares the same CUSIP number. For example, the week bill issued on March 22, , and maturing on September 20, , has the same CUSIP number A27 as the week bill issued on June 21, , and maturing on September 20, , and as the 4-week bill issued on August 23, that matures on September 20, During periods when Treasury cash balances are particularly low, the Treasury may sell cash management bills or CMBs.
These are sold at a discount and by auction just like weekly Treasury bills. They differ in that they are irregular in amount, term often less than 21 days , and day of the week for auction, issuance, and maturity. When CMBs mature on the same day as a regular weekly bill, usually Thursday, they are said to be on-cycle. Treasury bills are quoted for purchase and sale in the secondary market on an annualized discount percentage, or basis.
General calculation for the discount yield for Treasury bills is: Thus, for example, a quote of Several different notations may be used for bond price quotes. Notation such as The year Treasury note has become the security most frequently quoted when discussing the performance of the U.
Treasury bonds T-Bonds , or the long bond have the longest maturity , from twenty years to thirty years. They have a coupon payment every six months like T-Notes, and are commonly issued with maturity of thirty years. Federal government suspended issuing year Treasury bonds for four years from February 18, to February 9, However, because of demand from pension funds and large, long-term institutional investors , along with a need to diversify the Treasury's liabilities—and also because the flatter yield curve meant that the opportunity cost of selling long-dated debt had dropped—the year Treasury bond was re-introduced in February and is now issued quarterly.
When the CPI rises, the principal adjusts upward. If the index falls, the principal adjusts downwards. TIPS were introduced in The name derives from the days before computerization, when paper bonds were physically traded; traders would literally tear the interest coupons off of paper securities for separate resale.
STRIPS are used by the Treasury and split into individual principal and interest payments, which get resold in the form of zero-coupon bonds. Because they then pay no interest, there is not any interest to re-invest, and so there is no reinvestment risk with STRIPS. The "Certificate of Indebtedness" C of I is a Treasury security that does not earn any interest and has no fixed maturity. It can only be held in a TreasuryDirect account and bought or sold directly through the Treasury.
It is intended to be used as a source of funds for traditional Treasury security purchases. Purchases and redemptions can be made at any time.
Savings bonds were created to finance World War II. Unlike Treasury Bonds, they are not marketable. In , the Treasury Department started changing the savings bond program by lowering interest rates and closing its marketing offices. Series EE bonds reach maturity double in value 20 years from issuance though they continue to earn interest for a total of 30 years. Interest accrues monthly and is paid when the holder cashes the bond. Bonds issued in May or later pay a fixed interest rate for the life of the bond 0.
Series I bonds have a variable yield based on inflation. The interest rate consists of two components: The second component is a variable rate reset every six months from the time the bond is purchased based on the current inflation rate. New rates are published on May 1 and November 1 of every year.
In August, six months after the purchase month, the inflation component will now change to the rate that was published in May while the fixed rate remains locked. Interest accrues monthly, in full, on the first day of the month i. The fixed portion of the rate has varied from as much as 3. Besides being available for purchase online, taxpayers may purchase I-bonds using a portion of their tax refund via IRS Form Allocation of Refund.
Bonds purchased using Form are issued as paper bonds and mailed to the address listed on the tax return. Taxpayers may purchase bonds for themselves or other persons such as children or grandchildren.
The remainder of the taxpayer's refund may be received by direct deposit or check. Series HH bonds have been discontinued. Unlike Series EE and I bonds, they do not increase in value, but pay interest every six months for 20 years. When they are cashed in or mature they are still worth face value.
Issuance of Series HH bonds ended August 31, For the quantitative easing policy, the Federal Reserve holdings of U. The program is called QE3 because it is the Fed's third try at quantitative easing.
After the Federal Reserve buys Treasury securities on the open market as part of the QE program as it is prohibited from buying them directly from the US Treasury at auction , the Federal Reserve receives its interest thereafter, instead of the private sector seller.