Unit 7- US Treasury And Government Agency Secuities

Question 1

Treasury Note maturity lengths?

Answer 1

2, 3, 5, 7, and 10 years.

Question 2

T Bill maturities and denominations?

Answer 2

4, 26, and 52 weeks.

Denominations = $100 - $5 million dollars.

Question 3

How do TIPS work?

Answer 3

The interest remains consistent, but the principals adjusted to match the CPI.

When this adjustment is up, it is treated as phantom income, and subject to taxation.

Question 4

Denominations for all treasury securities?

Answer 4

$100 - $5 million

Question 5

Quotation method of treasury securities?

Answer 5

• T Bills = yield basis (note: the bid will be higher than the ask, because this is a yield quote, not the actual price being paid)
• T Notes & Bonds = % of par, in 1/32 increments (example: a quote of 98.11 = 98 11/32 = $983.4375)

Question 6

List the sources of government agency securities?

Answer 6

Authorized by US congress:

• Farm Credit Administrarion
• Government Nation Mortgage Association (GNMA)

Private corporations:

• Federal Home Loan Mortgage Corporation (FHLMC, Freddi Mac)
• Federal National Mortgage Association (Fannie Mae)
• Student Loan Marketing Association (Sali Mae)

Question 7

GNMA denominations?

Answer 7

$1,000 minimum, with $1 increments.

Question 8

What does the Farm Credit Administration do?

Answer 8

It oversees the Farm Credit System, which is a network on 68 lending institutions.

It also includes the following: the Federal Land Banks, Federal Intermediate Credit Banks, and Banks Of Cooperatives.

Question 9

The two types of securities offered by FHLMA?

Answer 9

• Mortgage Participation Certificates (PCs): manes principal and interest payments once a month.
• Guaranteed Mortgage Certificates (GMC): makes interest payments twice a year, and principal payments once a year.

Question 10

What is the Tennessee Valley Authority?

Answer 10

The country’s largest public power provider.

One unique feature is that they issue securities with 50 year maturities.

Question 11

Farm Credit System security denominations?

Answer 11

$1,000 minimum, with $1,000 increments.

Question 12

FNMA security denominations?

Answer 12

$1,000 minimum with $1 increments.

Note: interest is pain semi-annually.

Question 13

SLMA security denominations?

Answer 13

Typically $10,000 minimum.

Question 14

Taxation of interest on agency securities?

Answer 14

• FHLMA, GNMA, FNMA = taxes federally, and locally
• FCS = taxed federally, tax-exempt locally

Question 15

How are STRIPs and Treasury Receipts quoted?

Answer 15

On a yield to maturity basis, and sold at a discount of par.

Question 16

How are GNMA securities quoted?

Answer 16

As 1/32nds, on a 360 day/yr calendar.

Question 17

How often are T Bills auctioned?

Answer 17

Weekly.