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TNX 10 T-Bill Yield (TNX) RSS Feed

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$TNX 10 T-Bill Yield **UNDER CONSTRUCTION** Introduction to the Purpose of Bonds Treasury bonds are issued by the government of the United States in order to pay for government projects. The money paid out for a Treasury bond is essentially a loan to the government. As with any loan, repayment of principal is accompanied by a fixed interest rate. These bonds are guaranteed by the 'full faith and credit' of the U.S. government, meaning that they are extremely low risk (since the government can simply print money to pay back the loan). Additionally, interest earned on Treasury bonds is exempt from state and local taxes. Federal taxes, however, are still due on the earned interest. The government sells Treasury bonds by auction in the primary market, but they can also be purchased through a broker in the secondary market. A broker will charge a fee for such a transaction, but the government charges no fee to participate in auctions. Treasury bonds are marketable securities, meaning that they can be traded after the initial purchase. Additionally, they are highly liquid because there is an active secondary market for them. Prices on the secondary market and at auction are determined by interest rates. Treasury bonds issued today are not callable, so they will continue to accrue interest until the maturity date. One possible downside to Treasury bonds is that if interest rates increase during the term of the bond, the money invested will be earning less interest than it could earn elsewhere. Accordingly, the resale value of the bond will decrease as well. Rising inflation can also eat into the interest earned on Treasury bonds. Because there is almost no risk of default by the government, the return on Treasury bonds is relatively low, and a high inflation rate can erase most of the gains by reducing the value of the principal and interest payments. Investors who wish to participate in auctions and purchase Treasury securities directly from the Federal Reserve Bank can open a Treasury Direct Account. There are no fees associated with the account unless it contains over $100,000, at which point a very small maintenance fee is incurred. T-Bills have the longest maturity of any bond issued by the U.S. Treasury, from 10 to 30 years. The 30-year bond is also called the "long bond." Denominations range from $1000 to $1 million. T-bonds pay interest every 6 months at a fixed coupon rate. As mentioned above, these bonds are not callable, but some older T-bonds available on the secondary market are callable within five years of the maturity date.
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