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The U.S. Government is the largest borrower in the world; its debt load is well over seven trillion dollars and this number keeps getting higher due to deficit trend rising in recent years. The Government has to borrow to finance the difference between the incoming of tax and the spending on cost of running the government and,ironically,to service its debts! Borrowing money is raised through issuing Bonds,Notes,and Bills.

Treasury Bills are short term securities,their maturity terms include four weeks,13 weeks,and 26 weeks,it does not fit the general definition of bonds so,it will be discussed in more details in another opportunity. This article will explore Treasury Notes and Treasury Bonds.

Treasury Notes or T-Notes are intermediate-term bonds issued by the U.S. Department of Treasury,their maturities range from over one to ten years.The Notes are non-callable (that is they will not be called to redemption before their maturity) and issued in multiples of $1,000 of par (notes can have par values of $1,000,$2,000,$3,000,etc).Inte rest will be paid every six months to holders' accounts.

TIPs-Treasury Inflation Protection Securities- are bonds that have a special feature: principal is protected from inflation and deflation. That is,in time of inflation the principal is adjusted upward and in time of deflation it always can be redeemed at par value. TIPS are issued with fixed rate and the rates are usually slightly lower than other comparable bonds that do not have the inflation protection feature. Interest payments are paid every six months and Principal is increased by inflation,the amount added to principal is based on equal amount of CPI-Consumer Price Index. For example,every six months.

The Treasury calculates the difference between the CPI at the beginning and at the end of that period, then uses that result to find the amount of money to add to the beginning principal balance.So,during inflation periods,the interest rate of the TIPs is fixed but the interest payment increased due to the increasing principal.On the other hand,during the deflation period,principal will be adjusted downward but never below par value.

STRIPS-Separate Trading of Registered Interest and Principal of Securities.The name sounds long but,luckily,it can be grouped into an easy short form! STRIPS are actually zero coupon bonds or bonds that do not have stated interest rate when issued.So,how will STRIPS holders get paid? The structure of zero coupon debts in general is based

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