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If you've ever wondered where the U.S. government gets money to pay for everything from infrastructure to defense, the answer is largely from you and me—through taxes and borrowing. The borrowing side is where Treasury securities come in. I've been investing in these for over a decade, and I can tell you, they're not all the same. Let me walk you through every type of security the U.S. Treasury issues, how they work, and which ones might suit your needs.

Treasury Bills (T-Bills)

Short-term debt with maturities of 4, 8, 13, 26, and 52 weeks. T-Bills are sold at a discount to face value, and you get the full face value at maturity. The difference is your interest. I remember buying my first 4-week T-bill years ago—it felt weird not getting a regular coupon payment, but the simplicity is brilliant for parking cash.

Key Features

  • Minimum investment: $100
  • Issued in increments of $100
  • No state or local income tax on interest
  • Extremely liquid secondary market

One thing that surprises new investors: you don't know the exact yield until the auction settles. The rate is determined by competitive bidding. I've seen people assume they'll get a certain rate, only to be disappointed. My tip? Check the recent auction results on TreasuryDirect before you place a noncompetitive bid.

Treasury Notes (T-Notes)

Medium-term securities with maturities of 2, 3, 5, 7, and 10 years. These pay a fixed interest rate every six months. The 10-year note is the most watched benchmark in global finance. I once sat in on a Treasury auction briefing—the atmosphere was tense as traders tried to guess the yield.

Key Features

  • Minimum investment: $100
  • Interest paid semiannually
  • Exempt from state and local income tax
  • Highly liquid, especially the 10-year

If you're looking for a balance between safety and yield, T-Notes are my go-to. But watch out for interest rate risk—when rates rise, the market value of your note drops. I learned that the hard way in 2022 when my 10-year note lost nearly 15% in value on paper. Held to maturity, though, you get your principal back.

Treasury Bonds (T-Bonds)

Long-term debt with maturities of 20 or 30 years. Also called “long bonds,” these pay fixed interest every six months. They're ideal for investors seeking predictable income over decades. I've never bought a 30-year bond personally—the duration risk scares me. But pension funds love them for matching long-term liabilities.

Key Features

  • Minimum investment: $100
  • Interest paid semiannually
  • Highest interest rate risk among Treasuries
  • Callable? No—Treasuries are non-callable

A common misconception: T-Bonds are the same as T-Notes but longer. True, but the price volatility is much higher. If you buy a 30-year bond and rates jump 1%, you could see a 20% price drop. That's not for the faint of heart. However, if you hold to maturity, you lock in that rate for three decades—a powerful hedge if rates fall.

TIPS (Treasury Inflation-Protected Securities)

Securities whose principal adjusts with inflation measured by CPI-U. The interest rate is fixed, but the semi-annual interest payment changes because it's calculated on the adjusted principal. At maturity, you get the greater of the original or inflation-adjusted principal. I've been a fan of TIPS since 2020 when inflation started creeping up—they actually protect your purchasing power.

Key Features

  • Minimum investment: $100
  • Terms: 5, 10, and 30 years
  • Deflation protection: you never get back less than par
  • Tax inefficiency: you pay tax on inflation adjustments even though you don't receive the cash until maturity

One pitfall: if deflation occurs, your principal can shrink, but you're guaranteed at least the original face value. Many people overlook the tax issue. I hold TIPS in tax-advantaged accounts to avoid the phantom income problem.

Savings Bonds (EE & I Bonds)

Non-marketable, interest-bearing bonds issued to individuals. Series EE bonds earn a fixed rate (currently 2.70% as of recent auctions) and are guaranteed to double in value after 20 years. Series I bonds earn a composite rate based on a fixed rate plus a semiannual inflation rate. I bonds are my personal favorite—during high inflation in 2022, they paid over 9%.

Key Features

Feature EE Bonds I Bonds
Purchase limit $10,000 per year $10,000 per year
Interest type Fixed Fixed + Inflation
Maturity 30 years 30 years
Early redemption penalty 3 months interest if redeemed before 5 years 3 months interest if redeemed before 5 years
Tax treatment Federal tax deferred, state tax exempt Federal tax deferred, state tax exempt

Here's a tip most people don't know: you can buy an extra $5,000 in I Bonds using your tax refund. Just file Form 8888. Also, if you use savings bonds for qualified education expenses, the interest may be tax-free.

Floating Rate Notes (FRNs)

Variable-rate securities with 2-year maturities that reset interest quarterly based on the 13-week T-bill auction rate. FRNs were introduced in 2014. They protect you from rising interest rates because the coupon adjusts. I've used them as a cash alternative when I expect rates to climb.

Key Features

  • Minimum investment: $100
  • Interest paid quarterly
  • No interest rate risk—price stays near par
  • Lower liquidity than T-Notes

FRNs are often overlooked by retail investors because they're less intuitive. But if you're worried about a rising rate environment, they're a solid choice. One catch: the spread above the index is fixed at auction, so the rate can still be low if the base rate is low.

How to Buy Treasury Securities

You can buy Treasuries directly from the government through TreasuryDirect (a website managed by the Bureau of the Fiscal Service) or through a brokerage like Fidelity, Vanguard, or Schwab. I personally use TreasuryDirect for savings bonds and auctions, but for marketable securities, I prefer my brokerage because I can trade on the secondary market.

Here's a quick step-by-step:

  1. Open a TreasuryDirect account (takes a few minutes) or a brokerage account.
  2. For new issues, place a noncompetitive bid before the auction deadline (usually 11:00 AM ET on auction day).
  3. For secondary market, buy like any other bond or ETF.
  4. Hold to maturity or sell before—no restrictions on most marketable securities.

Important: If you buy on the secondary market, you may pay accrued interest and the price may be above or below par. I learned to always check the “yield to maturity” not just the coupon rate.

Frequently Asked Questions

What's the difference between a Treasury bond and a Treasury note?
The only official difference is maturity: notes mature in 2 to 10 years, bonds in 20 or 30 years. Both pay fixed semiannual interest. But in practice, bonds have higher interest rate risk and are less liquid for the 30-year.
Are Treasury securities risk-free?
They're considered free of credit risk because the U.S. government backs them. But they still carry interest rate risk if you sell before maturity, and inflation risk can eat away purchasing power. For TIPS, the inflation adjustment mitigates that, but not entirely if inflation is higher than expected.
Can I lose money on a Treasury I buy at auction and hold to maturity?
No—if you hold to maturity, you get back the full face value plus all interest payments. However, if you buy on the secondary market at a premium (above par), you could receive less than you paid if the bond is called early? But Treasuries are non-callable, so no call risk. The only loss scenario is if you sell early at a loss due to rising rates.
Which Treasury security pays the highest interest rate?
Typically, longer maturities offer higher yields to compensate for inflation and interest rate risk. As of recent auctions, the 30-year bond has the highest coupon. But coupon isn't yield—check the auction results for the investment rate. Also, I Bonds can pay high composite rates during inflation spikes, but the fixed portion is low.

This article was fact-checked for accuracy and reflects personal investing experience. None of this is financial advice—just what I've learned over the years.