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obligations that are issued below face value and redeemed at
maturity at face value. Treasury notes (T-notes) are issued in
2-, 3-, 4-, 5-, 7-, or 10-year maturities. T-notes are issued at
or near face value, and they are redeemed at maturity at face
value. T-notes bear a fixed rate of interest, which is payable
semiannually, and most T-notes are noncertificated; i.e., they do
not exist in physical form but trade through an electronic system
known as the Federal Reserve Bank book entry system. Treasury
bonds (T-bonds) mature 10 or more years after issuance. T-bonds
are issued at or near face value, and they are redeemed at
maturity at face value. T-bonds bear interest, which is payable
semiannually, and most new T-bonds are noncertificated. The
interest rate on new T-bonds is set at auctions held by the
Federal Reserve Bank of New York (the Fed).
Treasury securities are rarely listed on an organized
exchange, and the volume of trading of Treasury securities on
organized exchanges is minimal. Virtually all trading of
Treasury securities occurs over the counter or at auctions which
the Treasury holds to sell the securities initially. Auction
bidders tender competitive or noncompetitive bids. Competitive
bids generally represent the price that bidders offer to buy the
securities, and noncompetitive bids generally represent the
bidders' offers to buy the securities at the average of the
successful competitive bids. Bidders, other than primary dealers
(as defined below), must deposit 10 percent of any competitive
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Last modified: May 25, 2011