T-Note

See the “T” in there?

Well, it stands for treasury, and all of these are one flavor or another of government debt.

That is, the U.S. government raises cash for itself to fix roads, build bridges, and uh, erect statues of LeBron James dunking on the Statue of Liberty. Or whatever it thinks the public wants or needs.

It does that by auctioning off these debt securities, with the promise of its full faith and credit to pay back the money as the paper specifies.

T-Notes are "mid-range" paper, in that they generally have maturities of 2, 3, 5, 7, and 10 years. T-Notes carry a stated interest rate and look a lot like normal corporate bonds.

T-Bills, on the other hand, are generally very short-term paper, usually coming due within a few days, all the way up to a year. They're sold or auctioned at a discount, meaning that the T-Bill might promise to pay a thousand bucks. If it comes due in 6 weeks, you might pay $996 for it, and you get a whopping 4 bucks in interest for your 6 weeks of hard work owning that T-Bill, with it just...sitting there.

Then there are TIPS: Treasury Inflation-Protected Securities.

Why do we have such a thing? Well, the problem with super-duper safe bonds, like those of the U.S. Government, is that investors holding them a long time often do worse, after taxes, than inflation. Meaning that, if inflation is growing at 3% a year and their bonds are only returning 1% a year after tax, then the investor is losing 2% a year in buying power. And that’s a problem.

In the 1990s, when investors started to realize this issue, they began to, um, well, stop buying U.S. Government bonds. And that’s a huge problem for a country that desperately needs to raise cash all the time. So, rather than risk an illiquid marketplace where buyers weren’t buying government paper, Uncle Sam created TIPS, which basically adjusts the end-value the principal investors get based on the consumer price index (CPI), which is a key measure of the average selling prices of a carton of milk, a gallon of fuel, a dozen eggs, and a grand slam breakfast at Denny's.

No hair gel and bleach necessary.