Marketable Public Debt

The Marketable Public Debt today is composed of just three types of securities- Treasury bills, notes, and bonds. By law, a U.S. Treasury bills must mature in one year or less. In contrast, U.S. Treasury notes range in original maturity from 1 year to 10 year, while Treasury bonds carry any maturity, though generally they have a maturity at issue of more than 10 years.
Under federal law, Treasury bonds can carry a maximum interest rate of 4¼ percent, unless special exemption from this legal interest- rate ceiling is granted by Congress. Because only limited exemptions have been granted and interest rates have been far higher than 4¼ percent in recent years, the proportion of long-term bonds making up the Treasury‘s marketable debt has declined significantly. In contrast, Treasury bills and notes carry no legal interest-rate ceiling. Moreover, with their greater liquidity and marketability, bills and notes have been especially attractive to investors in recent years. bills and notes represented about 40 percent of all marketable government obligations in 1960; by 1980, however, these securities accounted for more than 85 percent of the marketable public debt.