What Are Treasurys? Government Bonds vs. Notes vs. Bills
Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Treasury bonds, notes and bills are three different types of U.S. debt securities.
They vary in their length to maturity (the time it takes to receive the face value) and the interest rates they pay.
Treasury bills mature in less than one year, Treasury notes in two to five years and Treasury bonds in 20 or 30 years.
The easiest ways to buy Treasury bonds, notes and bills are directly from the U.S. government at TreasuryDirect.gov or through a broker.
Bonds vs. notes vs. bills overview
Treasury bonds, notes and bills are three types of investments the U.S. government issues. You loan the government money by buying a Treasury bond, note or bill and earn interest in return. The selling of U.S. debt finances the operations of the federal government while also offering additional benefits to investors. Treasury securities, also known as Treasurys, are:
Low-risk debt securities issued and backed by the U.S. government.
Budget-friendly investments that can be purchased in increments of $100.
Exempt from state and local taxes (you only pay federal taxes on the interest earned).
As you consider Treasurys, let's define a few essential terms. The face value of the Treasury is its price if held to maturity, while the Treasury's interest rate is the profit you receive for loaning the U.S. government money.
Current Treasury rates
Rates are sourced from Google Finance and may be delayed. Data is solely for informational purposes, not for trading.
U.S. Treasury bonds
Treasury bonds are the longest-term U.S. debt security with maturities of either 20 or 30 years. Also known as T-bonds, Treasury bonds pay a fixed rate of interest every six months. While Treasury bonds may yield lower returns on average than a higher-growth investment such as stocks, T-bonds offer stability and liquidity. In other words, their returns are more reliable and can help cushion the effects of stocks in your portfolio. And in a pinch, they're easy to sell and turn into cash.
» Learn more: Treasury bonds
U.S. Treasury notes
U.S. Treasury notes are short- and intermediate-term debt securities with maturities of 2, 3, 5, 7 or 10 years. Like Treasury bonds, Treasury notes pay a fixed rate of interest every six months. Treasury notes, or T-notes, can be bought directly from the government, at auction or through a broker.
» Learn more: Treasury notes
U.S. Treasury bills
In contrast to notes and bonds, Treasury bills are the shortest-term government investment and mature in four weeks to one year. Treasury bills are also known as zero coupon bonds, meaning unlike bonds and notes, they don't pay a fixed interest rate. Instead, Treasury bills are sold at a discount rate to their face value. The "interest" you receive (so to speak) is the difference you receive between the face value of the bill and its discount rate when it matures.
» Learn more: Treasury bills
What are the risks of investing in Treasurys?
All investments involve some level of risk. The higher the risk, the greater the potential reward or loss. When issuing any loan, the issuer's creditworthiness describes how likely they are to make good on their promise to repay you.
Treasury bonds, bills and notes tend to be some of the lower-risk investments on the market because the full faith and credit of the U.S. government backs them. That said, Treasury securities of longer duration — such as bonds and notes — are more exposed to a particular type of risk called interest rate risk.
Here's how it works. Bonds and interest rates have an opposite relationship: bonds tend to lose value when interest rates rise. The risk with buying a Treasury bond of longer duration is that interest rates will increase during the bond's life, and your bond will be worth less on the market than new bonds being issued. Treasury bonds tend to pay higher interest than the shorter T-bills and notes to compensate investors for the interest rate risks they take with their purchase.
Keep in mind the opposite can also happen when interest rates fall and the price of your bond increases.
» Learn more: Interest rate risk
per trade for online U.S. stocks and ETFs
when you open a new, eligible Fidelity account with $50 or more. Use code FIDELITY100. Limited time offer. Terms apply.
no promotion available at this time
Get up to 12 free fractional shares (valued up to $3,000)
when you open and fund an account with Webull.
How to buy Treasury bonds, notes and bills
Treasury bonds, notes and bills can be bought in two main ways. You can purchase Treasury securities directly from the U.S. government at TreasuryDirect.gov or through a broker. You will need three pieces of information to get started: a taxpayer identification number or Social Security number, a U.S. address and a checking or savings account to link for payment.
If you'd rather buy Treasury securities in bulk, look for Treasury exchange-traded funds, or ETFs, and mutual funds that group bills, bonds and notes together for quick, easy and affordable diversification. Buying a collection of Treasurys with different duration lengths also helps reduce the effect any one bill, bond or note has on your portfolio.
» Learn more: How to buy Treasury bonds