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1) THE BASICS

1.1) What are Treasury bills, notes, and bonds?
1.2) What distinguishes bills, notes, and bonds from one another?
1.3) What are other names for Treasury bills, notes, and bonds?
1.4) Why are Treasury bills, notes, and bonds classified as "marketable securities?"
1.5) Are Savings Bonds and Treasury bonds the same thing?
1.6) Are Treasury securities still issued in paper form?
1.7) Why should I buy Treasury bills, notes, or bonds?

2) BUYING TREASURY SECURITIES

2.1) How can I buy Treasury bills, notes, and bonds?
2.2) Who uses the Commercial Book-Entry System?
2.3) Who uses TreasuryDirect?
2.4) Are all Treasury securities available for purchase in both TreasuryDirect and the Commercial Book-Entry System?
2.5) Can I transfer securities between TreasuryDirect and the Commercial Book-Entry System?
2.6) What is meant by "competitive bidding" and "noncompetitive bidding?"
2.7) What are the minimum and maximum purchase amounts?
2.8) Can Treasury securities be pledged as collateral?

3) TreasuryDirect

3.1) What is TreasuryDirect?
3.2) How do I buy securities in TreasuryDirect?
3.3) Can I conduct business on this Internet site?
3.4) What services do you provide over the phone?
3.5) How can I obtain forms?
3.6) What are the bidding deadlines?
3.7) What happens to late bids?
3.8) Can I sell TreasuryDirect securities prior to their maturity?
3.9) When I go south for the winter, will the Postal Service forward my TreasuryDirect mail?
3.10) Does any print publication thoroughly explain TreasuryDirect?

4) AUCTION INFORMATION

4.1) How does the government sell Treasury securities?
4.2) Where can I find up-to-date information on auctions?
4.3) Where can I find long-range information on upcoming auctions -- ones that are a couple of months or longer away?
4.4) What is a single-price auction?

5) MISCELLANEOUS MATTERS

5.1) What is a "called" bond?
5.2) What are reopenings?
5.3) Where can I find how much debt is held in the various types of Treasury securities?
5.4) Who publishes daily information on how Treasury securities are performing on the secondary market?
5.5) Where can I find interest rates for zero coupon bonds and STRIPS?
5.6) Where can I find constant maturity rates for Treasury securities?

1) THE BASICS

1.1) What are Treasury bills, notes, and bonds?

Treasury bills, notes, and *bonds are marketable securities the U.S. government sells in order to pay off maturing debt and raise the cash needed to run the federal government. When you buy one of these securities, you are lending your money to the U.S. government.

1.2) What distinguishes bills, notes, and bonds from one another?

Treasury bills are short-term obligations issued with a term of one year or less. Treasury bills are sold at a discount from face value (par) and do not pay interest before maturity. The difference between the purchase price of the bill and the amount that is paid at maturity (par), or when the bill is sold prior to maturity, is the interest earned on the bill.

Treasury notes and bonds bear a stated interest rate, and the owner receives semi-annual interest payments. Treasury notes have a term of more than one year, but not more than 10 years. Treasury *bonds are long-term obligations issued with a term of more than 10 years.

1.3) What are other names for Treasury bills, notes, and bonds?

You may hear them called "marketable Treasury securites," "Treasury securities," or "Treasuries."

1.4) Why are Treasury bills, notes, and bonds classified as "marketable securities?"

Because after they're issued they can be sold prior to maturing. This buying and selling takes place in the secondary market at prevailing market prices.

1.5) Are Savings Bonds and Treasury bonds the same thing?

No. Both are bonds, and both are issued by the Department of the Treasury, but they aren't the same. One of the primary differences is that Treasury bonds are marketable and Savings Bonds aren't; that is, the owner of a Treasury bond can sell his bond prior to maturity, but the owner of a Savings Bond cannot transfer his security to someone else.

Though both securities are bonds issued by the Treasury Department, when people in the financial world refer to a Treasury bond they aren't referring to a Savings Bond; again, they are referring to the marketable security described in the answer to Question 1.1. Similarly, when they refer to Treasury securities, they often are referring only to marketable Treasury securities.

1.6) Are Treasury securities still issued in paper form?

No. The only place to buy a paper Treasury today is the secondary market. Since 1986 all securities issued by the Treasury Department have been book-entry, meaning they exist only as electronic records in computers.

1.7) Why should I buy Treasury bills, notes, or bonds?

Whether you should buy them is a determination for you to make. These factors may help you decide:

• Outside observers highly recommend Treasury securities. "U.S. Treasuries should be the foundation of any well-diversified investment portfolio," says Merrill Lynch.

• Treasury securities are safe. They're backed by the full faith and credit of the United States government.

• Treasury securities cannot be taxed by state or local governments.

• Treasury securities are liquid; you can sell them at any time.

• If you hold your securities in TreasuryDirect (see Section 3 below), you aren't charged a fee unless your account is greater than $100,000.

• In TreasuryDirect, you can buy and reinvest Treasury securities, and perform most account maintenance functions, using the worldwide web or our automated phone system. It's quick and convenient.

2) BUYING TREASURY SECURITIES

2.1) How can I buy Treasury bills, notes, and bonds?

Treasury securities can be bought at original issue or on the secondary market. At original issue, the Treasury Department sells new securities to the public. On the secondary market, traders buy and sell previously issued securities. Unless otherwise noted, this web site deals with the sale of securities at original issue. (For information on buying securities on the secondary market, contact a broker or dealer.)

The Treasury Department sells securities at more than 150 auctions held throughout the year. To buy a security at one of these auctions, you must place a bid. You can place your bid directly with the government in a program called TreasuryDirect, or you can place your bid through brokers, dealers, or financial institutions, in what is called the Commercial Book-Entry System.

2.2) Who uses the Commercial Book-Entry System?

Large investors, including institutional investors such as banks, use the Commercial Book-Entry System, but so, too, do some individual investors.

2.3) Who uses TreasuryDirect?

This program is designed for investors who buy Treasury securities when they're first issued by the government and intend to hold the securities until they mature. As such, the program is popular with individual investors, particularly ones who don't consider themselves prolific securities traders.

2.4) Are all Treasury securities available for purchase in both TreasuryDirect and the Commercial Book-Entry System?

No. Cash management bills (special bills offered sporadically, as borrowing needs warrant) and 4-week Treasury bills cannot be bought in TreasuryDirect, but can be transferred into TreasuryDirect after being purchased in the Commercial Book-Entry system. STRIPS (notes and bonds whose interest and principal components have been separated) cannot be purchased or held in TreasuryDirect; they are available only in the Commercial Book-Entry System.

2.5) Can I transfer securities between TreasuryDirect and the Commercial Book-Entry System?

Yes, with one exception: STRIPS (notes and bonds whose interest and principal components have been separated). They cannot be transferred from the Commercial Book-Entry System into TreasuryDirect.

2.6) What is meant by "competitive bidding" and "noncompetitive bidding?"

These are the two types of bidding for a Treasury security. When you bid for a Treasury bill, note, or *bond, you must choose whether to bid competitively or noncompetitively.

If you place a noncompetitive bid, we guarantee you will receive the security you desire. What's the catch? It's not a catch, really, but by bidding noncompetitively you agree to accept whatever rate or yield is determined at the auction. Investors who don't consider themselves expert securities traders usually bid noncompetitively.

A competitive bid is one where you specify the rate or yield you will accept, and we may reject your bid or grant it in less than the full amount you wanted.

2.7) What are the minimum and maximum purchase amounts?

For all Treasury securities the minimum purchase amount is $1,000, regardless of whether you're bidding competitively or noncompetitively. Bids must be made in multiples of $1,000. Noncompetitive bids from a single bidder may not exceed $1,000,000 for the same offering of Treasury bills, or $5,000,000 for the same offering of Treasury notes or *bonds. Maximum amounts for competitive bids are given in auction announcements. All of these rules apply regardless of whether you're using the Commercial Book-Entry System or TreasuryDirect.

2.8) Can Treasury securities be pledged as collateral?

When held in the Commercial Book-Entry System, yes. When held in TreasuryDirect, no.

3) TreasuryDirect

3.1) What is TreasuryDirect?

TreasuryDirect is a program in which you buy Treasury securities directly from the U.S. government, rather than through a bank or broker. The program is intended for investors who buy securities at original issue and hold them until they mature. It is popular with individual investors, especially ones who aren't prolific securities traders.

3.2) How do I buy securities in TreasuryDirect?

Treasury securities are sold at auctions. To buy a security, you must place a bid. Depending on circumstances, you can place your bid through TreasuryDirect by three means: a paper form called a tender, this web site, and our automated phone system. To determine which of those options are available to you, you must first decide whether you want to make a competitive or noncompetitive bid.

Noncompetitive bid. Almost all TreasuryDirect investors choose this option. If you bid this way, we guarantee you will receive the security you desire. What's the catch? It's not a catch, really, but by bidding noncompetitively you agree to accept whatever rate or yield is determined at the auction.

Competitive bid. In this form of bidding, you specify the rate or yield you will accept, and we may reject your bid or grant it in less than the full amount you wanted.

Means of bidding. If you are an existing TreasuryDirect customer, you can place a noncompetitive bid by a tender, this web site, or our automated phone system. If you aren't yet one of our account holders, or if you are placing a competitive bid, you must use a tender.

3.3) Can I conduct business on this Internet site?

Yes you can, if you're an established TreasuryDirect account holder. If you have an account, you can use TreasuryDirect Electronic Services to noncompetitively buy securities, schedule reinvestments, obtain account balances and detailed CUSIP balances, request Statements of Account and duplicate 1099-INT forms, and change the mailing address and phone number on your account.

3.4) What services do you provide over the phone?

Our toll-free line, 800-722-2678, provides a variety of options, including TreasuryDirect Electronic Services (TDES). Using the automated TDES system, existing customers can noncompetitively buy securities, schedule reinvestments, request a Statement of Account, check account balances, order a duplicate 1099-INT form, and pay their account maintenance fee (applied only to accounts of more than $100,000).

Also, existing and prospective customers can use 800-722-2678 to obtain recorded information on our securities and auctions, to order forms and publications, and to speak to a customer service representative.

3.5) How can I obtain forms?

You have a variety of options:

• Order or download forms from this web site.
• Order forms by sending an e-mail to [email protected]. Include your mailing address and daytime telephone number with the list of forms that you desire.
• Order forms by calling 800-722-2678.
• Order forms from your TreasuryDirect office.

3.6) What are the bidding deadlines?

The deadlines will be stated in the auction announcement. Though they can vary, they generally are as follows.

Bids submitted over the worldwide web or phone -- only noncompetitive bids can be made this way -- must be received before 12:00 Noon Eastern Time on auction day. (Tenders are officially accepted when you receive a confirmation number. For web bids, the time of day is determined by the time displayed on the web page. For phone bids, the time of day is kept by the TreasuryDirect system.

Competitive bids submitted by mail must be received prior to 1 p.m. Eastern Time on auction day.

Noncompetitive bids submitted by mail must be postmarked by the day before the auction and received by the issue date of the security.

3.7) What happens to late bids?

TreasuryDirect Electronic Services won't allow bids to be submitted late, so this question applies only to paper tenders.

For a note, *bond, or 52-week bill . . . If a tender is postmarked timely but arrives late, we'll return it to you.

For a 13-week or 26-week bill . . . If a tender is postmarked timely but arrives late, we'll place it in the next auction.

3.8) Can I sell TreasuryDirect securities prior to their maturity?

Yes. The best way to sell is through Sell Direct. We do all the work, obtaining quotes from different brokers and selling at the highest price offered. All you do is pay a nominal fee. It's much more convenient and cost-effective than dealing with a bank or broker, though that too is an option.

3.9) When I go south for the winter, will the Postal Service forward my TreasuryDirect mail?

Yes. All you need to do is submit a temporary change of address form to the Postal Service. If you do that, TreasuryDirect mail sent to your primary address will be forwarded to your temporary address.

If you prefer, you can change the address on your TreasuryDirect account. You can make the change by visiting this web site, by calling 800-722-2678 and talking to a customer service representative, or by sending your TreasuryDirect office a Transaction Request (PD F 5178).

3.10) Does any print publication thoroughly explain TreasuryDirect?

Yes, the TreasuryDirect Investor Kit (PD P 009). To obtain your copy, download or order it from this web site; or request a copy by calling 800-722-2678 and speaking to a customer service representative, by sending an e-mail to [email protected], or by writing your TreasuryDirect office.

4) AUCTION INFORMATION

4.1) How does the government sell Treasury securities?

The Treasury Department sells securities at more than 150 auctions held throughout the year. To buy a security at one of these auctions, you must place a bid. You can place your bid directly with the government in a program called TreasuryDirect, or you can place your bid through brokers, dealers, or financial institutions, in what is called the Commercial Book-Entry System.

You must also choose whether to place a competitive or noncompetitive bid. For an explanation of that issue, see Question 2.6.

4.2) Where can I find up-to-date information on auctions?

Several sources exist. This web site posts results of previous auctions of bills, notes and bonds, as well as information regarding upcoming auctions. You also can obtain auction information by calling 800-722-2678 or writing to a TreasuryDirect office. Finally, many newspapers report auction schedules and results.

4.3) Where can I find long-range information on upcoming auctions -- ones that are a couple of months or longer away?

Auction dates aren't officially announced until some seven to 10 days prior to an auction. However, every February, May, August and November, we put out a three-month calendar with tentative auction dates. These tentative dates can change, but seldom do. In addition to the three-month calendar, we show a general pattern of when auctions are held; this information is available by type of security and by month.

4.4) What is a single-price auction?

Treasury bills, notes, and *bonds are sold at single-price auctions. In a single-price auction, all successful competitive bidders and all noncompetitive bidders are awarded securities at the price equivalent to the highest accepted rate or yield of accepted competitive tenders.

5) MISCELLANEOUS MATTERS

5.1) What is a "called" bond?

Some Treasury bonds issued before 1985 are subject to call by the Treasury Department. When it exercises its option to call a bond, Treasury steps in prior to the bond's original maturity date and redeems the bond and stops paying interest on it.

5.2) What are reopenings?

In a reopening, we issue an additional amount of a previously-issued note. The reopened security has the same maturity date and interest rate as the original security; however, compared to the original security, the reopened security has a different issue date and usually a different purchase price.

If the price determined at the reopening exceeds the par value of the security, you will owe a premium. Also, when buying a reopened security, you must pay the interest the security earned before you bought it; however, we will pay this interest -- it's called "accrued interest" -- back to you in your first semiannual interest payment.

5.3) Where can I find how much debt is held in the various types of Treasury securities?

Treasury's Financial Management Service publishes informative tables in its quarterly Treasury Bulletin. Go to the issue you're interested in and find "Public Debt Operations." Beneath that heading, see "Maturity Schedules of Interest-Bearing Marketable Public Debt Securities" and "Offerings of Bills and Public Offerings."

5.4) Who publishes daily information on how Treasury securities are performing on the secondary market?

Daily rates and information from the secondary market are available by clicking the "Secondary Market Rates" link at the top of this page and most other TreasuryDirect web pages. Also, you can visit the Federal Reserve Board of Governors site for rate information based on constant maturities for Treasury securities. Finally, see the GovPX site for additional information on securities.

5.5) Where can I find interest rates for zero coupon bonds and STRIPS?

STRIPS are sold in the marketplace as "Treasury zeros" or "Treasury zero coupons." They are called "zeros" because purchasers do not receive periodic interest payments. The Treasury does not issue or sell STRIPS. They can be purchased only through broker/dealers and depository institutions. They are the people to contact for rates. Also, bid and asked quotes and asked yields for U.S. Treasury STRIPS appear in The Wall Street Journal in the table "Treasury Bonds, Notes & Bills." This data may appear in other newspapers as well.

5.6) Where can I find constant maturity rates for Treasury securities?

The constant maturity rate, and other key interest rates, are contained in a statistical release, the H.15, published by the Federal Reserve Board.

*The Treasury Department hasn't offered a bond since its decision in October 2001 to suspend issuance of the 30-year bond.