U.S. Treasury Securities
Chapters in this video
- 0:00 Why Treasuries are the zero-default-risk baseline
- 1:58 T-bills: the $100 minimum and the discount mechanism
- 3:18 T-notes and T-bonds: semiannual coupons and 32nds quotes
- 4:47 Which Treasury has the greatest interest rate risk
- 5:29 Universal rules: OTC, book-entry, and the tax trap
- 6:39 Rapid-fire exam recap
What this video covers
- Why Treasuries carry zero default risk (full faith and credit of the U.S. government) but still carry interest rate and inflation risk
- How T-bills work as zero-coupon, discount instruments with maturities up to 52 weeks, and why they do NOT pay semiannual interest
- Maturity ranges for T-notes (2 to 10 years) and T-bonds (20 to 30 years), and why both pay fixed semiannual coupons
- How to translate a 32nds quote like 99-16 into 99.50% of par, and why 101-08 equals 101.25% of par
- Why T-bonds have the greatest price volatility and interest rate risk of any Treasury security
- The tax trap: Treasuries are subject to federal income tax but exempt from state and local income tax
- Universal features across all marketable Treasuries: $100 minimum purchase, book-entry only, over-the-counter (OTC) trading, and actual/actual day-count
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