Policy Issues • Financing the Government
Treasury Securities
Treasury securities are debt instruments issued to finance government operations. They range from short-term bills to longer-term notes and bonds. They are widely used as benchmarks for interest rates and as foundational collateral in many financial markets.
Marketable vs Non‑Marketable
Two Broad Categories
- Marketable: can be bought and sold in secondary markets, supporting liquidity and price discovery.
- Non‑marketable: cannot be traded in the same way and are generally issued to specific investor groups under specific terms.
Common Types
- Bills: typically short-term instruments sold at a discount.
- Notes and bonds: coupon securities that pay interest periodically.
- Inflation-linked: securities that adjust principal based on inflation measures.
Auctions and Re-openings
Many Treasury securities are issued through auctions. A re-opening adds additional supply to an existing security to build a larger outstanding amount and support liquidity.
- Announcement: terms are published in advance.
- Auction: bids are submitted and a clearing yield/price is determined.
- Settlement: securities are delivered and cash is exchanged.