How does the federal government borrow?

The federal government borrows by issuing Treasury securities. Most of the securities that are issued to the public are marketable—i.e., once the government issues them, they can be resold by whoever owns them. Marketable debt consists of billsTreasury bills are short-term securities that mature in 1 year or less from their issue date. Investors usually pay less than the bills’ par or face value (though Treasury may also issue bills at par), and when bills mature, they receive the par or face value. For example, a $1,000 bill might sell at auction for $980. When the bill matures, the investor receives the face value, in this case $1,000. The difference ($20) equals the interest earned., notesTreasury notes are securities that pay a fixed rate of interest every 6 months until they mature, which is when they pay their par value. They are issued either at par value or an amount that reflects a discount or a premium. Treasury notes mature in more than 1 year, but not more than 10 years, from their issue date., bondsTreasury bonds are securities that pay a fixed rate of interest every 6 months until they mature, which is when they pay their par value. They are issued either at par value or an amount that reflects a discount or a premium. Bonds mature in more than 10 years from their issue date., Treasury Inflation-Protected Securities (TIPS)Treasury Inflation-Protected Securities (TIPS) provide protection against inflation to investors who are willing to pay a premium for this protection in the form of a lower interest rate. TIPS are issued with a term of 5 years or more. The principal increases with inflation and decreases with deflation, but does not fall below par value. TIPS pay interest semiannually at a fixed rate. The rate is applied to the adjusted principal, so interest payments rise with inflation and fall with deflation. When it matures, an investor is paid the inflation-adjusted principal or the original principal (whichever is greater), thereby also being protected against deflation., and floating rate notes (FRNs).Treasury floating rate notes are securities that pay a variable rate of interest—based on the interest rate at the time of payment—every 3 months until they mature. They are issued at either par value or an amount that reflects a discount or premium. When they mature, they pay their par value. Like traditional Treasury notes, Treasury floating rate notes mature in more than 1 year, but not more than 10 years, from their issue date. These are offered in a wide range of maturities to appeal to the broadest range of investors. Currently, Treasury issues bills with maturities ranging from a few days to 52 weeks; notes with maturities of 2, 3, 5, 7, and 10 years; bonds that mature in 30 years; TIPS with maturities of 5, 10, and 30 years; and FRNs that mature in 2 years. A small portion of securities are nonmarketable, meaning they are registered to the owner and cannot be sold in the financial market (e.g., U.S. Savings Bonds). For additional information, see Debt Management: Floating Rate Notes Can Help Treasury Meet Borrowing Goals, but Additional Actions Are Needed to Help Manage Risk.

Marketable Securities Offered by Treasury

Source: GAO analysis of Treasury information