No coupon and trade at a discount, meaning that the investor is not paid interest in increments over the life of the investment, but instead the security is sold for an amount less than the face or par value of the security. When the security reaches maturity, the investor is paid face value.
Interest = par value minus cost
3- and 6-month treasury bills are auctioned every Monday
One year treasury bills are auctioned every four weeks
Treasury Bills mature on Thursdays unless it’s a holiday, then they mature on the next business day
Treasury Bills are quoted and traded on a discount yield that is converted to a bond equivalent yield.
“ Commercial paper is an unsecured and discounted promissory note issued to finance the short-term credit needs of large institutional buyers. Banks, corporations and foreign governments commonly use this type of funding.”
Bearer or depository trust company eligible. A depository trust company is a firm through which the members can use a computer to arrange for investment securities to be delivered to other members via computer, thus there is no physical delivery of the securities. A depository trust company uses computerized debit and credit entries.
Discount (most common). A discount is the difference between the purchase price of a security and its par (face) value. This discount represents the income to be earned on the security, and will be accreted over the life of the security.
“ Repo is a transaction in which two parties agree to sell and repurchase the same security. Under such an agreement the seller sells specified securities with an agreement to repurchase the same at a mutually decided future date and a price”