Compare U.S. Treasury bills, notes, and bonds by when you need the money and whether you want periodic interest. Bills mature in a year or less and pay face value at maturity; notes and bonds run longer and pay fixed interest every six months. Notes and bonds can sell for more or less than face value if you sell before maturity.
How bills, notes, and bonds differ
All three are marketable obligations of the U.S. Treasury. Their principal differences are term and cash-flow timing. TreasuryDirect lists these standard terms:
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| Security | Standard terms | Typical cash flow |
|---|---|---|
| Treasury bills | 4, 6, 8, 13, 17, 26, or 52 weeks | Sold at face value or at a discount; the holder receives face value at maturity. The purchase-price difference is interest. |
| Treasury notes | 2, 3, 5, 7, or 10 years | Fixed interest paid every six months until maturity. |
| Treasury bonds | 20 or 30 years | Fixed interest paid every six months until maturity. |
Terms and auction offerings are not the same thing: check the current auction calendar for what is being offered and when. TreasuryDirect’s marketable securities overview describes the security types and terms.
How the payments work
Bills: the return is paid at maturity
A bill has no periodic coupon payment. It may be purchased at a discount, then pays face value at maturity; the difference between the purchase price and face value is the interest. TreasuryDirect gives this formula for a discount bill: Price = Face value × (1 − (discount rate × time)/360). Its worked example of a $1,000 26-week bill bought for $999.27 illustrates the arithmetic, not a current rate or offer. See Treasury bills: TreasuryDirect.
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Notes and bonds: fixed coupon payments
Notes and bonds have a fixed interest rate set at auction and pay interest every six months until maturity. The coupon rate is not the same as the yield an investor may see quoted for a security, particularly when buying or selling it in the secondary market.
Compare them against your needs
1. Match the maturity to your time horizon
Start with when you expect to need the money. A bill has a term of a year or less, a note has a term of two to ten years, and a bond has a term of 20 or 30 years. If you sell before maturity, the price may differ from face value.
2. Decide whether you need interim income
Bills deliver their interest through the difference between purchase price and face value at maturity. Notes and bonds pay interest every six months. Compare the timing of those payments as well as quoted yield: the coupon rate and yield are different measures.
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TreasuryDirect defines marketable securities as transferable and says they can be sold before maturity. That access does not set the resale price. For notes and bonds, price moves with market yields: if yield to maturity is above the coupon rate, the price is below face value; if yield is below the coupon rate, the price is above face value; if the two are equal, the price is at face value. Details are on TreasuryDirect’s marketable securities overview.
4. Choose how to buy
Treasuries can be bought at auction or in the secondary market. TreasuryDirect accepts noncompetitive bids for auction purchases; a broker, dealer, or other financial institution may also provide access. With a noncompetitive bid, you agree to accept the rate, yield, or discount margin established at auction. Neither an auction purchase nor a general comparison guarantees a particular yield or price. Check the relevant auction announcement or broker quote for current terms. See TreasuryDirect’s overview.
5. Include taxes in your comparison
TreasuryDirect’s bill and note pages state that interest is subject to federal tax and exempt from state and local taxes. This is general information, not individual tax advice; confirm the applicable rules and your circumstances before making a tax decision. See the Treasury bill page and the Treasury note page.
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What Treasury backing does—and does not—tell you
TreasuryDirect states that marketable Treasury securities are backed by the full faith and credit of the U.S. government. That backing is not a promise that a security sold before maturity will fetch face value: market prices for notes and bonds can rise or fall as yields change. The product information cited here does not quantify an individual investor’s inflation risk, reinvestment risk, tax outcome, or suitability.
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