Which U.S. Treasury securities are issued and traded at a discount?

U.S. Treasury securities that are issued and traded at a discount are specifically Treasury bills, commonly referred to as T-bills. These securities are short-term government debt instruments that are sold at a price lower than their face value and do not pay periodic interest (or coupons). Instead, when they mature, the investor receives the full face value. The difference between the purchase price and the face value at maturity represents the interest earned by the investor.

In contrast, Treasury bonds and notes are issued with a fixed interest rate, and they pay interest to bondholders at regular intervals, known as coupon payments. These securities are not sold at a discount in the same manner as T-bills; they are typically issued at or near face value and trade in the secondary market at various prices depending on current interest rates.

Debentures, while referring to a type of unsecured bond, are not specific to U.S. Treasury securities at all and do not typically have the same structured issuance or trading characteristics as Treasury bills, bonds, or notes. This underscores the distinctive nature of T-bills being sold at a discount, making them the correct answer for this question.