Frequently Asked Question
What's the difference between bills, notes and bonds?
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.