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Markets closed Monday: Please be advised that the U.S. financial markets will be closed on Monday,...Show fullCollapse
Markets closed Monday:

Please be advised that the U.S. financial markets will be closed on Monday, May 29th, in observance of Memorial Day. Toronto stocks and foreign exhcange tables will generate on Monday, but no other stock market files or tables will be generated that day.

Normal production will resume on Tuesday, May 30th.

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Help: Treasury Securities (Bills, Bonds & Notes - Also known as Government Bonds)

Essentially, a government bond is a loan from you to the government. In return for your cash, the government agrees to pay you a certain amount of interest similar to a bank paying you interest on your savings account.

A Treasury bill, or T-bill, matures in three months, six months or one year. A Treasury bond matures in seven years or more. A Treasury note may mature in one to 10 years or more. Interest on all are exempt from state and local income tax; federal income tax can be deferred until they are cashed.

Government bonds come in many sizes. You can loan your money to the government for as little as three months or for as long as 30 years.

Many investors don't keep the bonds for the full time period - they trade them to other people as interest rates go up and down.

For example, suppose you give the government $1,000 for a 30-year treasury bond and the government agrees to pay you 7 percent interest. You keep your bond for a year and get $70. But all of a sudden interest rates start falling. They tumble all the way to 4 percent. If you bought a 30-year T-Bond from the government now, you would only get 4 percent interest. That's a big difference.

It also makes your 7 percent bond pretty valuable and another investor might be willing to pay you to get the bond. They might offer you the value of the bond plus five years of interest payments right now ($1350 total). You might find that attractive because you don't have to wait for a return on your investment and you don't have to worry that interest rates will soar to 12 percent making your bond less valuable.

Auction Rate and Trading Rate - The auction rate for government bonds is the rate set when the government holds its weekly auction each Monday (or on Tuesday following a federal holiday). This rate does not change until the next auction. The trading rate is the rate set by bond traders as they buy and sell government bonds throughout the week. It changes every day. It can be higher or lower than the auction rate.

Bid and Asked prices - The bid price shows the highest amount offered for a particular bond. The asked price shows the lowest amount the owner will sell for.

Bid and Asked Discount rates - T-bills do not pay regular interest payments like a Treasury Bond or Note due to its short term. They are sold at a discount (less than face value). A table showing this focuses on how big or small that discount is. The "Bid" field shows the highest rate offered for it. The "Ask" field shows the lowest rate the bill was offered at.

For example, if the bid price is 5.00 that means someone is willing to buy the particular bill for a 5 percent discount or 95 percent of par value. In other words, since par value is usually $10,000 the buyer is offering to pay $9,500. If the asked price is 5.50 that means someone is willing to sell the particular bill for a 5.5 percent discount or 94.5 percent of par value. In other words, the seller will sell for $9,450.

Current Yield is the percentage earned annually at the bond's current price.

A discounted bond is sold below its face value. The buyer then waits until the bond matures and sells it at its face value, thus making a profit.

Maturity date - The date the bill comes due. A Treasury bill can be redeemed for its full value once it reaches its maturity date. Treasury bonds and notes stop paying interest once they mature.

Par Value is simply the face value of the bond or the amount repaid when the bond matures.

Yield to Maturity or YTM - This figure takes into account both current yield and the difference between the price you pay and the sum you'll be paid back at maturity.

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