Government Issued T-Bills & Munis
Government T-Bills & Munis
Treasury Bills (T-bills) provide a way for the United States government to fund projects by raising money from the general public. The simplicity of T-bills is attractive to investors, who purchase the securities at a price that is less than their face value (par value) and receive a payment from the government for the full value of the bills upon maturity. T-bill securities have a short-term maturity and are issued to mature at three-month, six-month, and one-year maturities ("Investopedia," 2015). A primary distinction of T-bills from, say, coupon bonds is when the interest is paid. T-bills pay interest upon maturity and coupon bonds pay interest semi-annually ("Investopedia," 2015).
As a money market instrument, T-bills are quite popular in large part because individual investors can afford them, and because neither local nor state taxes are levied on T-bills. While institutional investors commit very large sums to their investments, individual investors can choose from T-bill denominations as low as $1,000. Typical T-bill denominations are $5,000, 10,000, $25,000, $50,000, $100,000, and $1 million ("Investopedia," 2015).
Globally, treasury securities (T-bills and the like) are considered to be risk-free investments, topping the list of safe investments, since they are backed by the government that issued the treasuries ("Investopedia," 2015). But this safety comes with a price: returns are low because the investment risk is low, and investors who cash out before the maturity of the securities may not receive all the money back that they invested when they purchased the bills ("Investopedia," 2015).
Treasury bills, notes, and bonds are all issued to investors at auction through a competitive bidding process. In order to purchase a T-bill, an investor must submit a competitive or non-competitive bid for the securities ("Investopedia," 2015). For bids that are submitted non-competitively, the investor...
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