Financial Markets and Institutions (2-downloads)

Type

Maturity

Treasury bill

Less than 1 year

Treasury note

1 to 10 years

Treasury bond

10 to 30 years

1

We noted in Chapter 11 that Treasury bills were also considered default-risk-free except that a budget

stalemate in 1996 almost caused default. The same small chance of default applies to Treasury bonds.

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Chapter 12 The Bond Market

283

Treasury STRIPS

In addition to bonds, notes, and bills, in 1985 the Treasury began issuing to deposi-

tory institutions bonds in book entry form called Separate Trading of Registered

Interest and Principal Securities, more commonly called STRIPS. Recall from

Chapter 11 that to be sold in book entry form means that no physical document exists;

instead, the security is issued and accounted for electronically. A STRIPS separates

0

2

4

6

8

10

12

14

1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

2004

2002

Rate (%)