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1Repair Windows errors before they cause bigger problems2Fix the driver behind crashes, sound loss and screen glitches3Clear out junk files and repair common Windows errorsFor money you expect to use within a year, Treasury bills are generally a better fit than Treasury bonds: bills mature in 4 to 52 weeks, while bonds mature in 20 or 30 years. Choose a bill whose maturity is close to your planned spending date. A bond can be sold sooner, but its market price may be higher or lower than what you paid. This is a maturity-based comparison, not individualized investment advice.
How Treasury bills and bonds differ
| Feature | Treasury bills | Treasury bonds |
|---|---|---|
| Maturity | Regular terms of 4, 6, 8, 13, 17, 26, or 52 weeks, according to TreasuryDirect. | 20 or 30 years, according to TreasuryDirect. |
| How returns work | Typically purchased at a discount or at par; Treasury pays face value at maturity, and the difference is the bill’s interest. | Pay interest every six months. The coupon rate is set at auction; the market price reflects the relationship between that rate and the yield to maturity. |
| Fit for a short-term goal | You can select a maturity near the date you expect to need the money. | The long maturity may mean selling before your short-term goal comes due. |
| Tax treatment | Federally taxable; exempt from state and local taxes. | Federally taxable; exempt from state and local taxes. |
Sources: Treasury bills, Treasury pricing and interest rates, and Treasury tax information.
Why bills usually suit money needed within a year
A bill’s short term can let you plan for a known cash need without committing to a decades-long investment. Match the bill’s maturity to the date you expect to use the money; the Treasury’s regular bill terms range from 4 to 52 weeks. TreasuryDirect says a bill can be held to maturity or sold earlier.
A bond’s 20- or 30-year term is a mismatch for a near-term spending date if you want to avoid relying on an early sale. Although it pays interest every six months, that schedule does not make the principal due soon.
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What happens if you sell before maturity?
Treasury marketable securities can be sold through a bank, broker, or dealer. If you sell before maturity, you receive the then-current market price, which may be above or below your purchase price as market yields change. The fact that Treasury securities are backed by the full faith and credit of the United States describes the issuer’s backing; it does not guarantee that an early sale will return your purchase price. See TreasuryDirect’s overview of marketable securities.
If you hold securities in a TreasuryDirect account, TreasuryDirect requires a 45-day holding period before sale or transfer. As a result, a 4-week bill held there cannot be sold early. If you use a broker, check its terms for selling or transferring securities. Details are in TreasuryDirect’s selling instructions.
Do bills pay more than bonds?
Not necessarily. Yields change over time, and the available figures here do not establish a current, dated comparison of suitable bill and bond auction yields. To compare potential returns, check recent auction results for the maturities you are considering on the same date. A higher yield, if available, does not change the bond’s long maturity or the possibility of a loss if sold before maturity.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Taxes on Treasury bills and bonds
TreasuryDirect says earnings from Treasury marketable securities are subject to federal tax and exempt from state and local taxes. That treatment applies to bill discount earnings as well as bond interest. For your individual tax situation or reporting, consult the IRS or a tax professional; TreasuryDirect’s tax forms and withholding guidance explains its reporting information.
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How to choose for a short-term goal
- Set the date you need the money. Identify when the cash must be available, rather than choosing an investment by its yield alone.
- Look for a bill maturity near that date. Treasury bills have regular terms from 4 to 52 weeks. If the available maturity does not match your timing, consider whether the mismatch is acceptable before buying.
- Decide whether you can tolerate an early-sale price. If you may need to sell before maturity, understand that the sale price can differ from what you paid; account for the applicable selling channel’s rules.
- Compare current yields only on a like-for-like date. Check recent Treasury auction results for appropriate maturities; do not assume bills or bonds always yield more.
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