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Investment
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Description
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Maturities
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Denominations
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Taxation
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U.S. Treasury Bills
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Short-term securities backed by the
"full faith and credit" of the U.S. government. T-bills
are issued at a discount and pay accreted interest at
maturity*
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A few days to 1 year auctioned in 3,
6, and 12 month maturities
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$10,000 min. $1,000 mult.
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Federally taxable; Exempt from state/local
taxes
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U.S. Treasury Notes and Bonds
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Intermediate to long-term securities
Notes and Bonds which carry a stated rate of interest,
payable semi-annually, backed by the "full faith and
credit" of the U.S. government*
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out to 30 years auctioned in 2, 3,
5, 10 and 30 year maturities
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$1,000 min./mult. $5,000 min. for 2
and 3 year notes
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Federally taxable; exempt from state/local
taxes
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Zero Coupon Bonds
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Created from government and agency
securities. Offered at a deep discount, zeros pay no
periodic interest; instead, interest compounds at a
stated rate, growing to full value at maturity.
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3 mos--40 years
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$1,000 min./mult.
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Although not received until maturity,
accreted interest is federally taxable each year as
ordinary income. STRIPS, REFCORPs, FICOs exempt from
state/local taxes
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Mortgage Backed Securities
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Represent ownership interest in a pool
of mortgage loans. MBS make monthly payments of interest
and principal, and have estimated maturity and payment
characteristics. Credit quality similar to that of federal
agency issues, except GNMAs which are government-guaranteed
as to timely payment of principal and interest.
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5-30 year estimated maturities 3-12
year average life
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GNMA: $25,000 min., $1,000 mult. FNMA
& FHLMC: $1,000 min/mult
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Fully Taxable
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Collateralized Mortgage Obligations
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Typically collateralized by MBS pools
designed to provide a wider range of maturities and
payment features. Monthly payments generally consist
of principal and interest, and maturity is estimated.
GNMA, FNMA and FHLMC issued CMOs carry government/agency
guarantees; "private label" CMOs offer high credit quality
based on collateral but are subject to market risk and
pre-payment risk.
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1-30 year estimated maturities 2-15
year average life
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$1,000 min./mult.
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Fully Taxable
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Asset Backed Securities
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Structured to provide monthly income
and high quality. Generally rated AAA and issued with
an intermediate maturity that is more certain than that
of MBS or CMOs. Primarily backed by major bank or store
credit card receivables, principal is scheduled to be
repaid in one lump sum at maturity.
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3-7 year expected maturities
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$1,000min./mult.
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Fully Taxable
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Federal Agency Securities
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Issued by government-sponsored enterprises,
with credit quality second only to Treasury securities.
Available as discounted securities or coupon-bearing
instruments which pay interest semi-annually.
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3 mos
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varies check issue
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Federally taxable; All exempt from
state/local taxes, except FNMAs, FHLMCs and IBRDs.
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