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U.S. Treasury issues three types of Treasury securities: Treasury bills (T-bills), Treasury notes (T-notes), and Treasury...

U.S. Treasury issues three types of Treasury securities: Treasury bills (T-bills), Treasury notes (T-notes), and Treasury bonds (T-bonds).  The time to maturity (TTM) of T-bills is 12-month or less than 12-month.  The TTM of T-notes is between 1 year and 10 years.  The TTM of T-bonds is longer than 10 years.  Which one(s) (T-bills, T-notes, or T-bonds) belong to the money market instrument(s)?  Which one(s) belong to the capital market instrument(s)?  If you would like to buy Treasury securities, which one(s) would you purchase?  Explain why.

 

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Answer #1

Money market instruments are short term debt instruments ranging in term from overnight to just under a year.

Capital market instruments are long term debt instruments which are used to raise funds for a term of more than 1 year typically.

Thus Treasury Bills Belong to money market instruments, while T-notes and T-Bonds belong to Capital market instruments.

Investors should make investments which match with their liability needs in order to have a balanced portfolio. Since I'm a student, my liabilities are mostly of short term nature (For eg. my college tuition fees which is to be paid annually) and thus I would invest in T-bills which is a money market instrument

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