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November/December 2017

Talking Treasuries

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How would you like the federal government to pay you for a change? When you buy Treasury bills, notes, or bonds, you’re lending money to the U.S. government; in return, the govern- ment pays you interest on the loan.

The interest on Treasuries is exempt from state and local, but not federal, income tax. Treasury securities have varying maturities, from short to very long. Here’s an overview.

T-bills for the Short Term

Investors can buy T-bills with 4-week, 13-week, 26-week, and 52-week maturities at a discount— that is, for less than their face value. At the end of the term, the investor receives the T-bill’s full face value. T-bills are generally considered low- risk investments and may be appropriate for an emergency fund or short- term goals.

T-notes in the Middle

Frequently used as a benchmark for other debt securities, T-notes are available in two-, three-, five-, seven-, and 10-year terms. They pay a fixed rate of interest twice a year, and at the end of the term, the full face value is returned to the investor. T-notes may be a suitable investment for investors who are seeking income or saving for mid- term financial goals, such as buying a home.

T-bonds for the Long Haul

Treasury bonds have a 30-year term, pay a fixed rate of interest semi- annually, and return the bond’s full face value at maturity. Investors looking for a source of income over the long term may want to consider T-bonds since they tend to pay higher interest rates than shorter term bonds. However, the possibility of rising interest rates in the future can make investors wary.



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