What's the difference between bills, notes and bonds?

By Investopedia Staff AAA
A:

Treasury bills (T-Bills

), notes and bonds are marketable securities the U.S. government sells in order to pay off maturing debt and to raise the cash needed to run the federal government. When you buy one of these securities, you are lending your money to the government of the United States.
T-bills are short-term obligations issued with a term of one year or less, and because they are sold at a discount from face value, they do not pay interest before maturity. The interest is the difference between the purchase price and the price paid either at maturity (face value) or the price of the bill if sold prior to maturity.
Treasury notes and bonds, on the other hand, are securities that have a stated interest rate that is paid semi-annually until maturity. What makes notes and bonds different are the terms to maturity. Notes are issued in two-, three-, five- and 10-year terms. Conversely, bonds are long-term investments with terms of more than 10 years.
To learn more about T-bills and other money market instruments, see What Fuels The National Debt and our Money Market Tutorial. For further reading on bonds, see our Bonds Basics Tutorial.

RELATED FAQS

  1. How are treasury bill interest rates determined?

    Find out why interest rates for U.S. Treasury bills are determined at auction and how so-called "competitive" bidders impact ...
  2. How do I buy treasury bills?

    Discover how Treasury Bills (T-bills) are a safe-bet investment for short-term returns. The percentages on the returns vary.
  3. What is the difference between a debenture and a bond?

    Learn how to differentiate between debentures and bonds, two types of debt securities that can be issued by a government ...
  4. How long can I hold my HH/H Bonds and still earn interest?

    Take advantage of your bond investment and learn how long you can hold on to your Series H/HH Bonds and still earn interest ...
RELATED TERMS
  1. Treasury Yield

    The return on investment, expressed as a percentage, on the debt ...
  2. Series I Bond

    A non-marketable, interest-bearing U.S. government savings bond ...
  3. Safe Haven

    An investment that is expected to retain its value or even increase ...
  4. Bond Resolution

    1. A document used with government bonds, especially general ...
  5. Fully Taxable Equivalent Yield

    The yield on a municipal bond, when the effect of reduced taxes ...
  6. Operation Twist

    The name given to a Federal Reserve monetary policy operation ...

You May Also Like

Related Articles
  1. Stock Analysis

    Government Bond ETFs: Pros and Cons

  2. Investing Basics

    CDs or Bonds: Which Investment is Better ...

  3. Bonds & Fixed Income

    Interested In West African Debt? Look ...

  4. Taxes

    10 Sources Of Nontaxable Income

  5. Insurance

    Municipal Bond Tips For The Series 7 ...

Trading Center