For money you expect to use within a year, Treasury bills are usually the better fit: their regular maturities range from 4 to 52 weeks, so you can choose one that comes due near your planned spending date. Treasury bonds mature in 20 or 30 years, making them a poor match for a short-term goal unless you are prepared to sell before maturity and accept whatever the market price is then. This is a maturity-based comparison, not a claim that bills always yield more.
How Treasury bills and bonds differ
| Decision factor | Treasury bills | Treasury bonds |
|---|---|---|
| Regular maturity | 4, 6, 8, 13, 17, 26, or 52 weeks, according to TreasuryDirect | 20 or 30 years, according to TreasuryDirect |
| How returns are paid | Typically bought at a discount or at par; at maturity, Treasury pays face value, and the difference is the bill’s interest | Pay interest every six months; the coupon rate is set at auction |
| Fit for a near-term goal | Choose a maturity close to when you expect to need the cash | A long maturity can mean selling well before the goal date |
| Early sale | Can be sold through a bank, broker, or dealer; TreasuryDirect requires a 45-day holding period before sale or transfer | Can be sold through a bank, broker, or dealer; the sale price can differ from the purchase price |
| Taxes | Federal tax applies; exempt from state and local taxes | Federal tax applies; exempt from state and local taxes |
Sources: Treasury Bills, Understanding Pricing and Interest Rates, About Treasury Marketable Securities, Selling a Treasury Marketable Security, and Tax Forms and Tax Withholding.
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Why bills usually suit short-term savings better
A short-term savings decision is primarily about when the money must be available. A bill’s term can be aligned with a known cash need—such as a planned expense within the coming months—so you can receive its face value at maturity instead of relying on an early sale. TreasuryDirect lists regular bill terms of 4, 6, 8, 13, 17, 26, and 52 weeks. Choose the term that most closely fits your date, allowing for the fact that a maturity date and your spending date may not be identical.
A Treasury bond has a 20- or 30-year maturity and pays interest every six months. That can make sense for a long-term holding, but it does not naturally line up with money needed soon. If you sell a bond before maturity, its market price reflects the relationship between its coupon rate and current yields; the price may be higher or lower than what you paid.
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Does a bond or bill pay more?
There is no permanent answer. Yields change over time, and a meaningful comparison requires recent auction results for suitable maturities on the same date. The available TreasuryDirect information describes how bills and bonds work but does not establish a dated, comparable set of current auction yields. Do not assume that a bond pays more simply because it has a longer term, or that a bill always offers the higher return.
For a short-term goal, compare the yield on a bill whose maturity fits your date with other options that have a similar time horizon. A bond’s quoted yield is not a substitute for matching its 20- or 30-year term to a goal due soon, especially if you may have to sell early.
What happens if you need the money early?
Treasury marketable securities can be sold before maturity through a bank, broker, or dealer. The sale happens at the then-current market price, so early access does not guarantee recovery of the purchase price. Treasury securities are backed by the full faith and credit of the United States; that issuer backing does not prevent a market price loss if you sell before maturity.
There is an additional access constraint if you buy through TreasuryDirect: TreasuryDirect requires a security to be held for 45 days before it can be sold or transferred. A 4-week bill held there cannot be sold early under that rule. If you expect to sell through a broker, check the broker’s own process and terms.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Taxes on bills and bonds
Treasury marketable-security earnings are subject to federal tax and exempt from state and local taxes, according to TreasuryDirect. For bills, earnings generally come from the discount; for bonds, they include interest payments. For personal tax treatment or reporting questions, consult the IRS or a tax professional.
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How to choose for a short-term goal
- Set the cash-need date. Identify when the money must be available, rather than choosing a security based only on its advertised yield.
- Match the maturity. For a goal within a year, look at bill terms that end near the planned date. TreasuryDirect lists regular terms from 4 through 52 weeks.
- Decide whether early access is essential. If it is, account for the possibility of receiving a different market price and the 45-day TreasuryDirect holding rule.
- Compare current yields on the same date. Use recent auction information for maturities that fit the same goal horizon; yields are time-sensitive.
- Consider the account and tax details. TreasuryDirect, banks, brokers, and dealers are relevant purchase or sale channels; confirm any intermediary’s terms and check tax questions with an appropriate professional.
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