Treasury bills and Treasury notes are marketable U.S. government securities sold at auction. Bills mature in four weeks to one year and normally pay through the difference between your purchase price and the face value returned at maturity. Notes mature in two to 10 years and pay a fixed interest rate every six months. The right choice depends on when you need the money, whether you want interim income, and how you will access cash before maturity.
You can buy either security through TreasuryDirect, a bank, broker or dealer. TreasuryDirect allows noncompetitive auction bids, but the auction rate is not known when you schedule the purchase. A TreasuryDirect holding generally must remain there for 45 calendar days before it can be transferred for an early sale, so the purchase channel matters as much as the maturity date.
As an Amazon Associate I earn from qualifying purchases.
Treasury bills and notes: what you are buying
Both bills and notes are marketable Treasury securities. You select an offering and submit an auction order; the Treasury sets the final auction terms. Your security is issued electronically, and you receive the promised principal according to its terms unless you sell it earlier.
Treasury bills
Treasury bills, often called T-bills, have short maturities of 4, 6, 8, 13, 17, 26 or 52 weeks. TreasuryDirect lists a minimum purchase of $100, with additional purchases in $100 increments.
#1 Best Overall
A bill is sold at a discount or at par. For a discounted bill, you pay less than its face value and receive the full face value at maturity. The difference is your return. For example, if a $1,000 face-value bill is issued for less than $1,000, the amount you receive at maturity is still $1,000. The actual discount and investment yield are determined at auction; do not assume a rate before the auction occurs.
Treasury notes
Treasury notes have 2-, 3-, 5-, 7- or 10-year maturities. The minimum purchase is $100, in $100 increments. The interest rate is fixed at auction, and the Treasury pays interest every six months until maturity. The TreasuryDirect description is precise: “Notes pay a fixed rate of interest every six months until they mature.”
At maturity, a note returns its principal. If you hold it to maturity, the scheduled interest payments and principal repayment are the cash flows you planned for. If you sell before maturity, the amount you receive is the market price available at that time rather than an automatically guaranteed amount.
What’s actually slowing this PC down?
Pick the symptom - the matching free tool is one click away.
Which security fits your cash timeline?
| Decision axis | Treasury bills | Treasury notes |
|---|---|---|
| Available maturities | 4, 6, 8, 13, 17, 26 or 52 weeks | 2, 3, 5, 7 or 10 years |
| How the return is paid | Usually a discount or par purchase, with face value paid at maturity | Fixed rate set at auction, with interest paid every six months and principal at maturity |
| Typical planning use | Money with a nearer, identifiable use date that matches the selected term | Money intended for a longer holding period where semiannual income is useful |
| Minimum and increments | $100 minimum; $100 increments | $100 minimum; $100 increments |
| Early-access issue in TreasuryDirect | A 45-calendar-day transfer restriction can outlast a four-week bill | Early sale requires transfer from TreasuryDirect to a bank, broker or dealer |
| Income-tax treatment | Federal income tax applies; exempt from state and local income taxes | Federal income tax applies; exempt from state and local income taxes |
The “typical planning use” is a practical interpretation of the official maturities and cash-flow patterns, not an investment recommendation. Match the maturity date to the date you might need the money, then consider the auction yield, your account’s costs and the practical route to an early sale.
Choose a bill when the date matters most
A bill can be useful when you have a known short-term date, such as a payment due in several months, and can select a term that ends before that date. The return is accumulated and paid with the face value at maturity rather than distributed every six months.
Choose a note when scheduled income matters
A note may fit money you expect to leave invested for years and for which twice-yearly interest payments are useful. Select the maturity that fits your horizon. A 10-year note is not interchangeable with a two-year note: both pay semiannual interest, but your principal is committed to different maturity dates unless you arrange an early sale.
Rank #2
- Ideal for Gifting
- Ideal for a bookworm
- Compact for travelling
Where you can buy Treasury bills and notes
TreasuryDirect is the U.S. government’s application for buying and holding Treasury marketable securities. A bank, broker or dealer can also accept auction orders and hold the securities for you. The channel affects transfer procedures, access to the secondary market and any provider charges, so decide on the account before placing an order.
Recommended Free Tools
| Purchase route | What it lets you do | Important consideration |
|---|---|---|
| TreasuryDirect | Submit noncompetitive bids for bills and notes and hold them electronically | A security generally must remain in the account for 45 calendar days before transfer or sale; the auction rate is unknown when you schedule the purchase |
| Bank, broker or dealer | Access Treasury auctions and hold marketable securities through the institution | Early-sale procedures, available offerings and fees depend on that provider and must be verified directly |
TreasuryDirect is designed for investors who want to place a noncompetitive auction order and hold the resulting security. An institution may be more practical if you expect to trade before maturity or want all of your marketable securities in an existing investment account.
Understand auction bidding before you order
Noncompetitive bids
A noncompetitive bid specifies the security and dollar amount you want, but not the rate. You agree to accept the rate or yield established by the auction. In return, a valid noncompetitive bid guarantees that you receive the requested security and amount, subject to the offering’s rules. This is the normal approach for an investor whose priority is obtaining the bill or note rather than trying to set a minimum acceptable yield.
Competitive bids
A competitive bid specifies a rate, yield or discount margin. If the bid is not accepted, you may receive no securities; an accepted bid can also be filled only in part. Competitive bidding is therefore different from naming a target rate and assuming the order will execute in full. Use it only if you understand the possibility of a partial or zero award.
The rate is unknown when a TreasuryDirect order is scheduled
TreasuryDirect states that the rate is not known when you schedule a purchase. The final result is set at auction. Check current auction announcements and results close to the purchase date rather than relying on an old rate, and distinguish a bill’s discount rate from its investment yield when comparing alternatives.
The Tool Desk
Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →How to buy through TreasuryDirect
- Set the cash date first. Write down the earliest date you might need the money and select a bill term or note maturity that does not conflict with that date. Include the possibility that you may need to sell early.
- Open and fund a TreasuryDirect account. Use the account’s linked funding method and confirm that the registration and bank details are correct before scheduling an order.
- Choose the marketable security. Select the available bill term or note maturity, then enter a purchase amount of at least $100 and in $100 increments.
- Select the bid type. A noncompetitive bid is the straightforward choice when you want the requested amount and will accept the auction result. Choose competitive bidding only when you can accept a partial or no award.
- Review the auction information. Confirm the security, maturity, amount and payment details. The rate or yield shown before the auction is not a guaranteed final rate.
- Submit and monitor the result. After the auction, TreasuryDirect records whether your order was awarded and the amount charged. Keep the auction result with your records for tax reporting.
- Set the maturity instruction. Decide whether proceeds should go to the designated bank account or a Certificate of Indebtedness, or whether to schedule reinvestment under the rules for that security.
The exact auction date and offering terms can change. Use the current Treasury auction calendar and offering announcement when placing an order rather than relying on a recurring schedule.
Buying through a bank, broker or dealer
An institution can submit an auction order for you or provide access to Treasury securities held in that account. The institution’s process may include its own order deadline, settlement instructions and charges. Ask, in writing if possible, whether the order is noncompetitive or competitive, when funds are withdrawn, how the security is registered and how an early sale is handled.
- Confirm which bill terms and note maturities are available for the specific auction.
- Ask whether the institution supports auction purchases, secondary-market purchases, or both.
- Check any transaction, custody or transfer charges before ordering. The official Treasury sources do not establish a universal fee schedule.
- Verify how proceeds and interest payments are delivered and whether automatic reinvestment is available.
- Learn the provider’s procedure and expected timing for selling before maturity.
What happens after you buy?
Holding a bill to maturity
The bill remains outstanding until its stated maturity date. At maturity, the Treasury pays the face value. Your economic return is the face value minus what you paid, adjusted for the amount and price shown on your confirmation. A bill does not send semiannual coupons.
Holding a note to maturity
A note pays its fixed interest every six months until the maturity date. At maturity, the principal is repaid. Keep the payment schedule and maturity date in your records so you know when cash will arrive and when a reinvestment decision is needed.
Reinvestment in TreasuryDirect
TreasuryDirect can automatically reinvest maturity proceeds, but the rules differ by security. A bill can be reinvested only into another bill with the same term. A note can be reinvested into another note, and the replacement note’s term may differ from the original.
The reinvestment option closes four business days before the relevant auction. Change or cancel the instruction before that cutoff. If no reinvestment is arranged, TreasuryDirect sends the maturity proceeds automatically to the designated bank account or to a Certificate of Indebtedness.
Can you sell before maturity?
Yes, but the process depends on where the security is held. A TreasuryDirect holding generally must remain there for 45 calendar days before it can be transferred or sold. To sell it early, you first transfer it to a bank, broker or dealer that can handle the transaction. This is an operational restriction, not a statement that every provider will use the same settlement timeline.
Rank #4
The four-week bill exception
A four-week bill matures before the 45-calendar-day TreasuryDirect holding period ends. Consequently, a four-week bill bought in TreasuryDirect cannot be transferred or sold there before maturity. If you need the possibility of an early sale during a four-week period, the TreasuryDirect route does not provide that access.
PC Slower Than It Used to Be?
A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11Outdated Drivers Are Slowing You Down
One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchWhat an early sale means financially
An early sale is made at the market price available through the bank, broker or dealer. The proceeds can differ from your original purchase amount and from the amount you would have received by holding to maturity. Ask the provider how it quotes prices, when the sale settles and what charges apply before you depend on the cash for a specific date.
How Treasury bills and notes are taxed
TreasuryDirect states that interest from both bills and notes is subject to federal income tax and exempt from state and local income taxes. For a bill, the taxable return is associated with the difference between the purchase price and the amount paid at maturity. For a note, the periodic interest payments are the visible cash flow.
The federal-versus-state distinction does not answer every taxpayer’s filing question. Keep purchase confirmations, maturity statements, interest records and sale records, and follow the reporting instructions that apply to your filing situation. If you sell before maturity, retain the transaction details because the sale proceeds and your tax basis may need to be reported differently from a security held to maturity.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Risks and practical pitfalls
Assuming a current yield is guaranteed
A scheduled TreasuryDirect order does not lock in a rate before the auction. Avoid building a budget around an assumed yield. Use the actual auction result for the return you record.
Quick wins for a faster PC:
Scan for outdated or missing drivers - takes under a minuteDriver Scan →Clear out junk files and repair common Windows errorsFree Scan →Choosing a maturity without checking the cash date
A security that matures after your planned expense can force an early sale. For bills, compare the exact maturity date for each available term. For notes, assume the principal is committed for the selected multi-year term unless you have a workable transfer and sale route.
Best Value
- It can be a gift option
- Comes with secure packaging
- Helpful in various ways
Ignoring the TreasuryDirect holding restriction
The 45-calendar-day rule can make TreasuryDirect unsuitable for money that might be needed quickly. It is especially decisive for four-week bills, which mature before a transfer can generally be made.
Confusing discount rate with investment yield
A bill’s quoted discount rate and its investment yield use different calculations. Compare like measures and read the auction result rather than comparing a discount quote with a yield from another security as though they were identical.
Forgetting the reinvestment cutoff
If you want proceeds reinvested, the instruction must be in place before the four-business-day cutoff. Otherwise, the proceeds go to the designated destination at maturity and you must place a new order.
Do these 3 things before closing this tab:
1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problemsAssuming every provider works the same way
Banks, brokers and dealers can differ in available offerings, deadlines, transfer steps and fees. Verify those details with the institution holding your security; no single provider’s pricing or user experience is established here.
Examples of matching a security to a goal
Known expense in three months
A bill with a term that matures before the expense can align the maturity payment with the planned use. Before ordering, check the actual maturity date and keep a separate cash reserve for expenses that arise before then.
Cash you want to deploy over several years
A note can provide fixed interest every six months while you hold it. Choose a two-, three-, five-, seven- or 10-year maturity based on how long you can leave the principal invested and whether the payment schedule is useful.
Uncertain need for cash next month
Do not place money that may be needed within weeks into a TreasuryDirect bill if the 45-day restriction would prevent a transfer. Consider whether an account with a bank, broker or dealer offers a practical early-sale route, and confirm the timing before buying.
A pre-purchase checklist
- Have you identified the earliest date you may need the money?
- Does the selected bill term or note maturity fit that date?
- Do you understand that the auction rate is unknown when a TreasuryDirect purchase is scheduled?
- Are you using a noncompetitive bid, or do you accept the partial-or-no-award risk of a competitive bid?
- Is $100, plus any additional amount in $100 increments, the correct purchase size?
- If you may need cash early, can the holding be transferred and sold through your chosen channel?
- Have you accounted for TreasuryDirect’s 45-calendar-day restriction and the four-week bill limitation?
- Will you receive maturity proceeds, or have you arranged reinvestment before the four-business-day cutoff?
- Have you recorded the federal-taxable and state/local-tax-exempt treatment and checked your own filing requirements?
Bottom line
Use a Treasury bill when a short maturity and a single payment at maturity match a near-term cash date. Use a Treasury note when you can commit money for two to 10 years and want fixed interest every six months. Buy through TreasuryDirect for straightforward noncompetitive auction orders, or use a bank, broker or dealer when its holding and early-sale process better fits your liquidity needs. In every case, base the decision on the exact maturity, the auction result and the account’s practical rules—not on an assumed rate or a generic promise of access.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
