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Glossary

Key Terms

Savings Bond
A savings security issued by the U.S. Treasury, showing that money has been loaned to the U.S. Government. The bond is a contract between the Government and the bond's registered owner. It is paid only to the owner of the bond whose information is registered and maintained by the Bureau of the Fiscal Service.
Bills
Also called T-bills or Treasury bills.  These are short-term investments that "mature," which means they are redeemed for their face value, in a few days to a year, and are sold at a discount from their face value.  When you buy a T-bill, you pay less than what it will be worth at the end of its term. The bill’s total value is called "face value." The difference between what you pay for the bill and its face value is the interest you earn.
Bonds
Also called T-bonds or Treasury bonds. These are long-term investments that reach their full value in more than 10 years. When you buy a T-bond, you may pay "less than," the "same as," or "more than" it will be worth at the end of its term. The bonds have a fixed interest rate, paid to you by the Government every six months. When you reach the end of the bond's term, the Government pays you the full value, or "face value," of the bond. You can hold the bond until it reaches its full value, or sell it before the end of its term.
Notes
Also called T-Notes, or Treasury Notes.  These are medium-term investments that reach their full value in two to ten years. The price you pay can be either "less than," the "same as," or "more than" the face value of the note. You get paid interest from the Government every six months. When you reach the end of the note’s term, the Government pays you the full value, or "face value," of the note. You can either hold the note until it reaches its full value, or sell it before the end of its term.
TIPS
Treasury Inflation-Protected Securities (TIPS) work like this: the value of the security is adjusted based on inflation. If inflation occurs, the value of the security increases. If deflation occurs, the security's value decreases. They have a set or fixed interest rate that is decided at an auction. At the end of the TIPS’ term, you get either its original face value, or the inflation-adjusted value, whichever amount is larger. You can hold the TIPS until it reaches its full value, or sell it before the end of its term.

All Terms


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A

Auction
A public sale of goods or property in which purchasers bid against each other until the highest price that any of them are willing to pay is reached, and is offered to a seller. Treasury securities, including bills, notes, bonds, and inflation-protected securities are bought and sold at auctions.   In Treasury auctions, some buyers bid “non-competitively” which means they accept the price set by the buyers who “competitively” bid against each other.

Beneficiary
The person who becomes an owner of a bond when the original bond owner passes away.  For example, if someone you know has a bond and you’re registered as the beneficiary, when they pass away, you automatically become the owner of that bond.
Bills
Also called T-bills or Treasury bills.  These are short-term investments that “mature”, which means they are redeemed for their face value, in a few days to a year, and are sold at a discount from their face value.  When you buy a T-bill, you pay less than what it will be worth at the end of its term. The bill’s total value is called “face value.” The difference between what you pay for the bill and its face value is the interest you earn.
Bonds
Also called T-bonds or Treasury bonds. These are long-term investments that reach their full value in more than 10 years. When you buy a T-bond, you may pay "less than," the "same as," or "more than" it will be worth at the end of its term. The bonds have a fixed interest rate, paid to you by the Government every six months. When you reach the end of the bond's term, the Government pays you the full value, or "face value," of the bond. You can hold the bond until it reaches its full value, or sell it before the end of its term.
Budget surplus
When the U.S. Government has more money than it needs to pay for the goods and services it provides.
Bureau of the Fiscal Service
The Bureau of the Fiscal Service (Fiscal Service) is an agency in the U. S. Department of the Treasury.  Fiscal Service manages the borrowing of money needed to run the federal government, accounts for the national debt, and provides franchise services for other Government agencies.

Consumer Price Index (CPI)
A way the Government measures the average price that Americans are paying for the things that they buy. The index is used to measure inflation or deflation.
Current Redemption Value
 
What a savings bond is worth at any specific time.

Debt
Money that one person or group owes to another.  Usually, the person who borrows the money has a limited amount of time to pay it back.  An example of debt would be if someone borrows $10,000 to buy a new car, they would have a $10,000 debt.
Debt ceiling
The maximum amount of money that the Government is allowed to borrow.  To raise the amount on the debt ceiling, the Treasury must get Congress to approve a new, higher limit.
Denomination
The dollar amount shown on the face of the security -  Also referred to as "face amount" or "face value."

Face Value
See "Denomination."
Federal Deposit Insurance Corporation (FDIC)
In response to the thousands of bank failures that occurred during the Great Depression, Congress created the Federal Deposit Insurance Corporation (FDIC) as an independent agency of the federal government. The FDIC preserves and promotes public confidence in the U.S. financial system by: insuring deposits in banks (keeping the money you have in the banks safe); managing the deposit insurance funds; and limiting the effect on the economy and the financial system when a bank fails.
Fixed rate
An interest rate that stays the same for the entire term of a loan or for the entire life of a security.

Great Depression
On October 29, 1929, known as “Black Tuesday,” the stock market crashed (steep and dramatic price and percentage declines in a stock market index, occurring just within a few days), marking the beginning the Great Depression.  The Great Depression resulted in high unemployment, severe poverty, and slow trade.  It affected economies worldwide and lasted until the early 1940s.
Greenbacks
A U.S. legal-tender note, printed in green on the back since the Civil War, the money was originally issued against “the credit” of the United States and not against gold or silver on deposit.

Inflation
A rise in the average prices that you pay for the things that you buy.  (Note:  If prices are falling, this is called “deflation.”)
Interest
When someone borrows or is loaned money, they typically must pay back the borrowed amount, plus extra money for the favor of letting them borrow it.  The extra money is called interest.  When you purchase a Treasury security, the Government is borrowing money from you. The Government will pay back the money it borrowed, and then pay you interest for letting them borrow your money.
Interest Rate
The cost of borrowing money.  An interest rate is a percentage of the “principal amount” (the original amount borrowed). This rate determines how much money must be paid in addition to the principal amount.

Legal Tender Act of 1862
A law which allowed the Government to print paper money, known as “greenbacks,” and sell $500 million dollars in bonds to raise money. 
Liberty bonds
Bonds sold by the Government to help pay for World War I.  Those who purchased liberty bonds were later paid back the value of their bonds plus interest.

Maturity
A Treasury security reaches maturity when its term expires.   The security is worth its face value when it matures. However, sometimes market conditions can make the security worth its full face value before its term even expires.   Also, savings bonds have an “original maturity” period during which the bond increases in value and becomes worth at least its face amount and an “extended maturity period” during which it continues to earn interest.  After Treasury securities fully mature, you do not get any more extra money (interest) if you keep the securities.

National Bank Act of 1863
Created a nationwide banking system that loaned money to the Government to pay for the Civil War. It also created a system of paper money and coins.
New York Stock Exchange (NYSE)
The oldest U.S. stock exchange, dating back to 1792.  The NYSE is located on Wall Street in New York City. It is where investors buy and sell listed companies’ common stock and a host of other securities. 
Notes
Also called T-Notes, or Treasury Notes.  These are medium-term investments that reach their full value in two to ten years. The price you pay can be either “less than”, the “same as”, or “more than” the face value of the note. You get paid interest from the Government every six months. When you reach the end of the note’s term, the Government pays you the full value, or “face value”, of the note. You can either hold the note until it reaches its full value, or sell it before the end of its term.

Principal
The original amount of a debt before interest is added.

Redeem
When you cash in your Treasury security for money, you have redeemed it.

Savings Bond
A savings security issued by the U.S. Treasury, showing that money has been loaned to the U.S. Government. The bond is a contract between the Government and the bond owner – the person who it is registered to. It is paid only to the owner of the bond whose information is registered and maintained by the Bureau of the Fiscal Service.
Secondary Market
The financial market where securities that were previously issued by the Treasury are bought and sold.
Securities
Treasury Securities include Bills, Savings Bonds, Notes, Treasury Bonds and Treasury Inflation-Protected Securities (TIPS).
Stock Market
A financial marketplace/exchange system where stocks, bonds, and other securities are openly traded. 

Taxes
Taxes are the main way that people pay for their government. It helps pay for goods, services, and supplies for the people of the United States - some of them being education, national defense, the space program, and social services programs. Some examples of taxes are income tax, corporate tax, and sales tax.
The Federal Reserve
The central bank to the U.S., created in 1913 to help stabilize the American banking and financial system.  The Federal Reserve System is a network of 12 regional Federal Reserve banks located in different states across the country.  It is led by the Board of Governors, each of whom is appointed by the President and approved by the Senate.
The New Deal
The name that President Franklin D. Roosevelt (FDR) gave his economic plan, intended to help fix the problems with the U.S. economy during the Great Depression.
TIPS
Treasury Inflation-Protected Securities (TIPS) work like this: the value of the security is adjusted based on inflation. If inflation occurs, the value of the security increases. If deflation occurs, the security’s value decreases. They have a set or fixed interest rate that is decided at an auction. At the end of the TIPS’ term, you get either its original face value, or the inflation-adjusted value, whichever amount is larger. You can hold the TIPS until it reaches its full value, or sell it before the end of its term.
Treasury Bonds
Also called T-bonds or Treasury bonds. These are long-term investments that reach their full value in more than 10 years. When you buy a T-bond, you may pay “less than”, the “same as”, or “more than” it will be worth at the end of its term. The bonds have a fixed interest rate, paid to you by the Government every six months. When you reach the end of the bond’s term, the Government pays you the full value, or “face value”, of the bond. You can hold the bond until it reaches its full value, or sell it before the end of its term.

U.S. Treasury
A department of the U.S. Government, whose core functions are: managing Government money; collecting taxes; producing mailing stamps; currency and coinage; managing Government accounts and the public debt; supervising National banks; advising on financial, economic, trade and tax policy; enforcing federal finance and tax laws; and investigating and prosecuting tax evaders, counterfeiters, and forgers.

War bonds
Another word for savings bonds issued during World War II.

View the Art of Bonds: View posters used by the United States Government to encourage people to purchase savings bonds Savings Bonds: Savings bonds can be purchased from most commercial banks in paper form or directly from the Treasury Department in electronic form.  Learn More... Fixed Rate:  An interest rate that stays the same for the entire term of a loan or for the entire life of a security