US Treasury Note Rates
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Returns on U.S. Treasury note rates and Treasury bill rates may be lower than other securities of the same maturity, but they are among the safest in the world. The notes and bills are backed up by the government of the United States and are considered nearly risk-free investments. The securities have some risks, of course, but this is mainly related to whether one will be able to sell them at profit if the need arises for them to be sold before maturity. Interest payments are generally exempt from state and local taxes, although federal taxes still apply. They can be bought through a broker or directly from the federal government. (If they are bought from the government, these securities can not be redeemed before they come to maturity. However, a broker can sell them for a customer in a secondary market.)
First, one needs to know the difference between the various securities. Treasury bills (T-Bills), notes (T-Notes), and bonds (T-Bonds) are three different entities. T-Bills have a maturity of one year or less. They have 4 week, 13 week and 26 week maturity levels. The Treasury bill rates are determined by weekly auction and depend upon what the bidders are willing to pay. Many regard T-Bills as the safest investment for the US investor. T-Bills do not provide interest payments. However, these are the only type of government security which can be purchased at a discount to face value. At maturity, the investor receives the face value of the bill. The profit comes from the difference between purchase price and face value. For example, if the customer pays $990 for a bill, and is paid $1,000 at maturity, the profit is $10. At a single auction, an investor is allowed to purchase up to $5,000,000 in T-Bills at the current auction's rates. (Note: There is another type of bill, whose purpose is cash management. These bills are not on a regular schedule. The terms may vary and are normally only for a few days.)
T-Notes are issued at maturities of 2, 5, and 10 years. There is a monthly auction for the 2 and 5 year notes, and the 10 year notes are auctioned eight times a year. Specific auction dates are shown on an auction schedule. This schedule is available on line and one can also sign up for notifications of such auctions by email. All US Treasury Note rates are paid interest twice a year. Like all government securities, notes are held and issued electronically. (Securities used to be issued in paper form, but these have all matured.)
Treasury Bonds are usually issued in 30 year maturities. T-Bonds also pay interest every six months. All of the various types of securities are issued in face values of $1,000. There are separate purchase minimums for each type of security. The minimum purchase is $1,000. An investor can usually get a better deal by buying directly from the US government. In fact, the government has a program designed to cut out the middleman. Under this system, no brokerage or transaction charges are imposed. If your account is greater than $100,000 an annual maintenance fee is charged. Check the website of the US Treasury for details on this special program. The program's name is Treasury Direct.
What about the return rates for these investments? US Treasury note rates and Treasury bill rates are in the news fairly often these days and they are regarded as important economic indicators. Other financial instruments, such as money market accounts, certificates of deposits, and mortgages take cues for their rates from US government securities. However, due to the nearly risk-free nature of these investments, the yield from Treasury notes and bills is low when compared with more risky ventures. Yet these are often an important part of an investor's portfolio. At times, one may wonder if it would be simpler and more profitable to just put extra funds in a savings account which is offering a better rate of return. However, remember that these returns are taxable by state, local and federal agencies, while interest from investments in US government securities are only subject to federal taxes. This factor, coupled with the knowledge that rates on savings accounts change fairly often, leads an investor to believe that returns from US Treasury note rates or Treasury bill rates may be a better bargain in the long term.
Speaking of the long term, do not forget to invest in the lives of others as returns are realized from the investments. This helps to guard against greed and a preoccupation with gaining wealth. It also blesses the lives of those who receive the gifts and help. Remember, He that despiseth his neighbour sinneth: But he that hath mercy on the poor, happy is he. (Proverbs 14:21)
In summary, investing in securities is a valid part of a portfolio. As with any investment, be sure to take the time to examine terms, conditions and fees which may apply to the account. Although US Treasury note rates and Treasury bill rates may not be spectacular, they are steady and sure investments. Since the securities are widely traded, T-Notes and T-Bills can be considered a fairly liquid investment as well. Coupled with a generous spirit, these securities can make a positive difference in the lives of others as well as oneself, which is an investment that will bring a sure reward.
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