2017/03/29 Council Agenda Packet

i TREASURY BILLS -Treasury bills are short-term debt obligations of the U.S. Government. They offer maximum safety of principal since they are backed by the full faith and credit of the United States Government.Treasury bills, commonly called "T- Bills,"account for the bulk of government financing, and are the major vehicle used by the Federal Reserve System in the money market to implement national monetary policy. T-Bills are sold in three, six, nine, and twelve-month bills. Because treasury bills are considered "risk-free,"these instruments generally yield the lowest returns in the major money market instruments. TREASURY NOTES AND BONDS-While T-Bills are sold at a discount rate that establishes the yield to maturity, all other marketable treasury obligations are coupon issued. These include Treasury Notes with maturities from one to ten years and Treasury Bonds with maturities of 10-30 years.The instruments are typically held by banks and savings and loan associations.Since Bills, Notes and Bonds are general obligations of the U.S. Government, and since the Federal Government has the lowest credit risk of all participants in the money market, its obligations generally offer a lower yield to the investor than do other securities of comparable maturities. UNDERLYING SECURITIES-Securities transferred in accordance with a repurchase agreement. YIELD-The rate at which an investment pays out interest or dividend income, expressed in percentage terms and calculated by dividingthe amount paid by the price of the security and annualizing the result. YIELD BASIS -Stated in terms of yield as opposed to price.As yield increases for a traded issue, price decreases and vice versa. Charts prepared on a yield basis appear exactly opposite of those prepared on a price basis. YIELD SPREAD -The variation between yields on different types of debt securities; generally a function of supply and demand, credit quality and expected interest rate fluctuations.Treasury bonds,for example, because they are so safe,will normally yield less than corporate bonds.Yields may also differ on similar securities with different maturities. Long-term debt,for example, carries more risk of market changes and issuer defaults than short-term debt and thus usually yields more. ZERO-COUPON BONDS - Securities that do not pay interest but are instead sold at a deep discount from face value. They rise in price as the maturity date nears and are redeemed at face value upon maturity.