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21 Cards in this Set

  • Front
  • Back
Direct Obligations
The Federal Gov't pays the interest & principal on debt.

1) Treasuries
2) Savings Bonds
1) T-Bills
2) T-Notes
3) T-Bonds
4) TIPS (Treasury Inflation Protection Securities)
Savings Bonds
1) Series EE
2) Series HH
Short-term zero coupon

Traded @ a discount from face (non-interest bearing sec)

Registration is in book entry form

Minimum denominations = $1000

* 1 month (4 weeks)
* 3 month (13 weeks)
* 6 month (26 weeks)
T-Notes & T-Bonds
T-Notes mature in 1 to 10 years & are currently the LONGEST new issue maturity of U.S. Gov't Debt.

T-Bonds mature in over 10 to 30 years.

Both pay interest semi-annually
TIPS (Treasury Inflation Protection Securities)
* Fixed interest rate over the life of the security, but the principal is adjusted every 6 months in an amount of equal to the Consumer Price Index.

* Not subject to purchasing power risk

* Pay interest semi-annually
* T-Bills, T-Notes & T-Bonds settle "regular way" on next business day (T + 1)

* "Skip day" = T + 2

* "Corporate" = T + 3
Series EE Savings Bonds
* Maturities up to 30 years

* Discount bonds issued @ 50% of face value in denominations of $50 up to $10,000

* Non-callable & non-negotiable

* Registered form only & non-transferable
Series HH Savings Bonds
* Pay interest semi-annually

* Come in $5000 to $10000 denominations

* Purchased by handing in EE bonds that are at least 6 months old, but not older than one year past maturity.
Treasury STRIP = Separate Trading of Registered Interest & Principal of Securities
* Issued by brokerage firms

* Firms buy large blocks of T-Bonds & T-Notes, then separate the interest from principal payments.

* Each interest & principal payment is then sold as a deep discount zero-coupon security

* Strips are NOT sold by the Gov't, AAA rated
Treasury Receipts
* Virtually obsolete due to the inception of T-STRIPS

* Brokerage firm buys a large basket T-Bonds or T-Bills & deposits them w/a trustee

* Bonds are stripped of their coupons & units are sold representing the repayment of principal @ maturity
Directly BACKED by the US Gov't
1) Export-Import Bank (EXIM Bank)

2) Government National Mortgage Association (GNMA) "Ginnie Mae"
Export-Import Bank (EXIM Bank)
* Provides funds to bolster trade between the US & other countries

* Allowed to borrow money from the US Treasury

* Interest is subject to federal, state & local taxes
Gov't National Mortgage Association (GNMA) "Ginnie Mae"
* Provides financiing for residential housing.

* Issues "pass through certificates" which are backed by pools of VA and/or FHA mortgages

* All mortgages in the pool must have the same maturity & interest

* Mortgages in pools have 25-30 year maturities

* Average life of mortgage pool is 12-14 years.

* Quoted in 32nds, but T + 3 settlements

* Interest is subject to federal, state & local taxes
Federal Farm Credit Banks (FFCB)
* 37 banks that extend credit to farmers.
Federal Home Loan Banks (FHLB)
* Provides funds to savings & loan institutions to meet seasonal demand.

* Treasury is allowed to buy $4 billion of these securities
Student Loan Marketing Association (SLMA) "Sallie Mae"
* Provides funding & liquidity to student loan makers.

* Buys insured & uninsured student loans

* Capitalized through a publicly traded common stock issue
Federal National Mortgage Association (FNMA)"Fannie Mae"
* Provides liquidity to mortgage providers by buying conventional residential mortgages which are insured or guaranteed by the FHA, VA, & Farmer's Home Association

* Have authority to borrow from the Treasury, but their issues are NOT backed by the Fed Gov't.

* Issue bonds w/min. denom. of $10,000

* Notes, Bonds & Stock trade on NYSE
Federal Home Loan MOrtgage Corporation (FHLMC) "Freddie Mac"
* Provides liquidity to federally insured savings institutions to finance new housing, particularly when credit is tight.

* Issue bonds backed by GNMA

* Pass through Certs backed by conventional mortgages.

* Issue "guaranteed mortgage cert", backed by guaranteed mortgages.
Pass Through Certificates
Security which is backed by a pool of mortgages, interest & principal payments on those mortgages are disbursed on a monthly basis to the certificate holders.
Collaterized Mortgage Obligations (CMOs)
* Limiting an investor's exposure to prepayment risk.

* Secured by FNMA, GNMA, & FHLMC

* AAA rated

* Interest is paid monthly