Treasuries
Compare Treasury bills, notes, and bonds.
Overview
U.S. Treasuries are marketable debt issued by the federal government. They set the risk-free yield curve and are widely used for income, liquidity, and portfolio ballast. Bills are sold at a discount and mature at par. Notes and bonds pay semiannual coupons. Prices and yields move inversely, and longer maturities are more sensitive to rate changes.
Types
Treasury Bills (T-Bills)
Maturities up to one year. Sold at a discount with no coupons. Common terms include 4 to 52 weeks.
Treasury Notes
Maturities from 2 to 10 years. Pay fixed coupons every six months.
Treasury Bonds
Long maturities, currently 20 and 30 years. Pay fixed coupons every six months.
Taxes
Federal
Interest is taxed as ordinary income. The discount on bills is treated as interest for tax purposes.
State and local
Treasury interest is generally exempt from state and local income tax. Capital gains are taxable at the state level.
Reporting
Expect Form 1099-INT for interest and Form 1099-B if you sell before maturity. Premium amortization or discount accretion can affect reported interest.
Buying Treasuries
Where to buy
Buy new issues at auction through a brokerage or TreasuryDirect. Buy on the secondary market through a brokerage.
Auction basics
Minimum purchase is typically $100 in $100 increments. Most individual investors place noncompetitive bids and receive the yield set at auction.
Settlement and income
Secondary trades generally settle T+1. Notes and bonds pay interest every six months. Bills pay all interest at maturity. Auto-roll can keep a ladder running.
Practical tips
Match maturities to cash needs. Use a ladder for predictable rollovers. Compare after-tax yield across bills and notes, and weigh duration risk before extending maturity.
FAQs
Are Treasuries safe?
They carry the full faith and credit of the U.S. government, so credit risk is minimal. Market risk remains, especially at longer maturities.
What is par yield vs the yield on a bond I buy?
Par yields are curve estimates for hypothetical par-coupon bonds. A specific bond's yield reflects its own price and coupon.
What happens if I sell before maturity?
You may have a gain or loss. Price depends on interest rates, time to maturity, and liquidity when you sell.
How are bills taxed if there is no coupon?
The difference between purchase price and par is interest for tax purposes. It is generally exempt from state and local income tax.
Should I buy at auction or on the secondary market?
Auctions are simple and transparent for standard maturities. The secondary market offers flexibility on size, settlement timing, and specific CUSIPs for building ladders.