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Compare U.S. Treasury bills, notes, and bonds by when you need the money and whether you want interest payments along the way. Bills mature in a year or less and pay face value at maturity; notes and bonds run longer and pay fixed interest every six months. If you sell a note or bond before it matures, its market price may be above or below face value.
How bills, notes, and bonds differ
| Security | Standard terms | Typical cash flow | May fit when |
|---|---|---|---|
| Treasury bills | 4, 6, 8, 13, 17, 26, or 52 weeks | Usually bought at a discount; the Treasury pays face value at maturity. The difference is the interest. | You have a shorter-dated cash need and do not need interim interest payments. |
| Treasury notes | 2, 3, 5, 7, or 10 years | Fixed interest every six months, with face value due at maturity. | You want a medium-term maturity and periodic interest. |
| Treasury bonds | 20 or 30 years | Fixed interest every six months, with face value due at maturity. | You want a longer-term maturity and periodic interest. |
These are standard terms listed on TreasuryDirect’s marketable securities pages. The securities are all obligations of the U.S. Treasury; their maturity and payment pattern are the key distinctions. Auction schedules and amounts offered can change, so check the current auction calendar rather than assuming a particular issue will always be available.
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How each security pays you
Treasury bills: discount paid at maturity
A bill does not send periodic coupon payments. It is sold at face value or at a discount, and the holder receives face value when it matures. If purchased below face value, the difference is the interest. TreasuryDirect gives the formula for a discount bill as Price = Face value × (1 − (discount rate × time)/360). Its example of a $1,000 26-week bill bought for $999.27 yields $0.73 at maturity; that is an illustration, not a current rate or offer. See Treasury bills.
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The interest rate for a note or bond is set at auction, and interest is paid every six months until maturity. The coupon rate is not the same thing as yield to maturity: the coupon describes the interest payments relative to face value, while yield to maturity reflects the price paid and the cash flows through maturity.
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In the secondary market, price depends in part on how the security’s yield compares with its fixed coupon rate. TreasuryDirect explains that a price is below face value when yield is above the coupon rate, at face value when they are equal, and above face value when yield is below the coupon rate. See Treasury notes and Treasury bonds.
Choose by matching the security to your needs
When will you need the money?
Start with your time horizon: bills mature in a year or less, notes in two to ten years, and bonds in 20 or 30 years. A maturity that lines up with a planned expense can reduce the need to sell early, though it does not determine whether a particular investment is right for you.
Do you want periodic income?
Choose based on payment timing as well as any quoted yield. Bills deliver the discount as interest at maturity; notes and bonds make fixed payments every six months. A quoted yield and a coupon rate are different measures, so compare like with like when evaluating available securities.
Could you need to sell before maturity?
Treasury marketable securities can be transferred and sold before maturity. However, marketability is not a promise of a particular resale price: a note or bond may sell for more or less than face value as market yields change. If you sell, the proceeds may not equal the amount due at maturity.
Where to buy and how auctions work
Treasury bills, notes, and bonds are sold at auction, and investors can also buy them in the secondary market. TreasuryDirect accepts noncompetitive bids for auction purchases; a broker, dealer, or other financial institution can also provide access. A noncompetitive bidder agrees to accept the rate, yield, or discount margin established at auction, rather than specifying a competing bid. The final auction result is not known in advance, so do not treat a particular yield or price as guaranteed. See TreasuryDirect’s buying information.
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TreasuryDirect says its marketable securities are backed by the full faith and credit of the U.S. government. That describes the government backing; it does not keep a note’s or bond’s resale price fixed if you sell before maturity. TreasuryDirect’s bill and note pages state that interest is subject to federal tax and exempt from state and local taxes. Tax treatment can depend on the applicable rules and your circumstances, so confirm details before making a tax decision; this is not individual tax advice.
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