Treasuries, STRIPS & TIPS — Q&A

$100 minimum for Treasuries versus the typical $1,000 par for corporate bonds.

T-bills — short-term, zero coupon, issued at a discount maturing at par (no semi-annual payments). T-notes (2–10 years) and T-bonds (up to 30 years) — interest-paying, issued at par, semi-annual coupons.

$30 interest ($1,000 par − $970 purchase price). T-bills earn return through the discount, not periodic coupons.

STRIPS are fully backed by the U.S. Government (Federal Reserve oversees creation). Treasury Receipts are created by financial institutions without government oversight — the underlying Treasuries are backed, but the stripped product itself is not.

They pay no periodic interest — return comes entirely at maturity. Phantom tax means the IRS taxes accrued interest annually even though no cash is received until maturity (e.g., $400 discount ÷ 20 years = $20 taxable per year).

Adjusted par = $1,020. Semi-annual payment = 3% × $1,020 ÷ 2 = $15.30. The coupon rate stays fixed; principal adjusts with CPI, so interest payments rise with inflation.

$26.01. ⚠️ TIPS adjust every six months — 4% annual = 2% per period: $1,000 × 1.02 × 1.02 = $1,040.40 adjusted par; 5% × $1,040.40 = $52.02 annual ÷ 2 = $26.01 semi-annual.

The investor receives the greater of original par ($1,000) or adjusted par — the floor protects against deflation eroding principal below the original face value.

U.S. Mint — coins. Bureau of Engraving and Printing (BEP) — paper bills. Federal Reserve — digital currency and distribution of all currency forms.

No. The Treasury stopped issuing callable securities in 1985; all current Treasuries are non-callable.