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    the US Bond Market - the key players in the market

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    You have been asked to write a training document about the US Bond Market for use in the new employee training program. In your document, you must make sure to address each of the following:

    1. the key players in the market; and the types of investments available to both individual investors and institutional investors,
    2. the way transactions are carried out, and
    3. the relation, if any, between the bond markets and the stock markets.

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    Hi there,

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    Treasury securities are government bonds issued by the United States Department of the Treasury, through their agency the Bureau of the Public Debt. They are the debt financing instruments of the U.S. Federal government, and are often referred to simply as Treasuries. There are four types of treasury securities: Treasury bills, Treasury notes, Treasury bonds, and Savings bonds. All of the Treasury securities besides Savings bonds are very liquid. They are heavily traded on the secondary market.

    Types of Investments:
    Treasury bill
    Treasury bills (a.k.a. T-bills) mature in one year or less. They are like zero coupon bonds in that 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. Treasury bills are considered by many the most risk free investment. Treasury Bills are commonly issued with maturity dates of 4 weeks, 91 days (~13 weeks), and 182 days (~26 weeks). Treasury Bills are sold weekly at an auction held on Mondays. Banks and financial institutions are the largest purchasers of T-Bills. T-Bills are quoted for purchase and sale in the secondary market on an annualized percentage yield to maturity or 'basis'.

    Treasury note
    Treasury notes (a.k.a. T-Note) mature between one and ten years. They have a coupon payment every six months. Treasury notes are commonly issued with maturities dates of 2, 3, 5 or 7 years, and for denominations from $1,000 to $1,000,000. T-Notes and T-Bonds are quoted on the secondary market at percentage of par in thirty-seconds of a point. So a quote of 95.7 on a note indicates that it is trading at a discount: $952.19 for a $1,000 bond.

    The 10-year Treasury note has become the security most frequently quoted when discussing the performance of the U.S. government-bond market and is used to convey the market's take on longer-term macroeconomic expectations. It is also important to the U.S. mortgage market which uses the yield on the 10-year Treasury note as a basis for setting mortgage interest rates.

    Treasury bond
    Treasury bonds (a.k.a. T-Bonds) mature in more than ten years. They have coupon payment every six months like T-Notes. Treasury bonds are commonly issued with maturity dates of ten and thirty years. The secondary market is highly liquid, so the yield on the most recent T-Bond offering was commonly used as a proxy for long-term interest rates in general. This role has largely been taken over by the 10-year note, as the size and frequency of long-term bond issues declined significantly in the 1990s and early 2000s.

    The U.S. Federal government stopped issuing the well-known 30-year Treasury bonds (often called long-bonds) on October 31, 2001. As the U.S. government used its budget surpluses to pay down the Federal debt in the late 1990s, the 10-year Treasury note began to replace the 30-year Treasury bond as the general, most-followed metric of the U.S. bond market. However, the U.S. Treasury announced in August 2005 that due to a flattening of the yield curve (the difference between short-term bond yields and long-term bond yields is ...