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About Government/Agency Bonds

About Bills, Notes and Bonds

You don’t actually receive a certificate when you buy a U.S. Treasury bill, note or bond. Your investment is tracked in a book-entry system of accounts that generates a receipt and periodic statements. Investors should understand the differences among Treasury bills, notes and bonds.

Treasury Bills, as the table "Treasury Securities at a Glance" indicates, are short-term instruments with maturities of no more than one year. They fill investment needs similar to money market funds and savings accounts. They could be a place to "hold" money an investor may need to be able to access quickly, for example in the event of an emergency. The Treasury bill market is highly liquid; investors can quickly convert bills to cash through a broker or bank. Treasury bills function like zero-coupon bonds, which do not pay periodic interest payments. Investors buy bills at a discount from the par, or face value, and then receive the full amount when the bill matures. For example, an individual could buy a 26-week bill that pays the full $1,000 at maturity for $970.28 at the time of purchase, effectively earning an annualized yield of 6.28% on the investment.

Treasury Notes are intermediate- to long-term investments, typically issued in maturities of two, three, five, seven and 10 years. These are typically purchased for specific future expenses, such as college tuition, or used to generate cash flow during retirement. Interest is paid semi-annually.

Treasury Bonds cover terms of longer than 10 years, and are currently being issued in maturities of 30 years. Interest is also paid semi-annually.


All information and opinions contained in this publication were produced by the Securities Industry and Financial Markets Association from our membership and other sources believed by the Association to be accurate and reliable. By providing this general information, the Securities Industry and Financial Markets Association makes neither a recommendation as to the appropriateness of investing in fixed-income securities nor is it providing any specific investment advice for any particular investor. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and sources may be required to make informed investment decisions.