Treasury bonds are complicated by history. Presently, Treasury sells bonds at a discount, but until 2001 T-bonds were sold as fixed-principal securities, like T-notes are today. Still, many fixed-principal T-bonds have not matured and are still owned by investors. Furthermore, T-bills and T-notes are all electronic, but the older outstanding T-bonds exist as paper certificates while the more recently issued ones exist as electronic entries in accounts.

Even though T-bonds are no longer sold as fixed-principal securities, they still pay interest every six months until maturity. At maturity, the U.S. Treasury pays back the principal to the owner. The principal is a multiple of $10,000, (or an order of magnitude more than the T-bills or T-notes, whose par value is $1,000).

The following table summarizes our discussion on the various types of treasuries discussed above:


Types of Treasury Securities
Maturity State/ Local Federal Tax Par value Bid Interest-bearing
T-bill Year or less Tax-exempt Non-exempt $1,000 dollar no
T-note 2-10 yrs Tax-exempt Non-exempt $1,000 yield yes
T-bond More than 10 years Tax-exempt Non-exempt $10,000 Now dollar, pre-2002 yield yes


Once you have a handle on the topic of T-bonds, you can move on to STRIPS (Separate Trading of Registered Interest and Principal of Securities), which are debt securities created by stripping coupons from a T-bond.

Agency Bonds

Related Articles
  1. Investing

    Introduction to Treasury Securities

    Purchasing bonds that are backed by the full faith and credit of the U.S. government can provide steady guaranteed income and peace of mind. Knowing the characteristics of each type of treasury ...
  2. Investing

    What are Treasury STRIPS?

    STRIPS is an acronym that stands for Separate Trading of Registered Interest and Principal Securities.
  3. Investing

    Buy Treasuries Directly From The Fed

    If you want government securities, go straight to the source. We'll show you how.
  4. Financial Advisor

    Top 4 Treasurys ETFs (SHY, IEI)

    Learn about the specifics of the top four U.S. Treasury ETFs and how investors can buy ETFs that invest in bonds along the yield curve.
  5. Investing

    Why You Should Stick with Stocks over the Long Term

    Over the long term, it pays to stick with stocks, despite the inevitable bouts of volatility that wrack stock markets from time to time.
  6. Investing

    Understanding Treasury Yield

    Treasury yield refers to the return on an investment in a U.S. government debt obligation, such as a bill, note or bond.
  7. Investing

    These 3 ETFs Are Safer than Cash (SHY, IEI)

    Learn how investors wanting to safeguard their principals may consider ETFs based on U.S. Treasurys; these securities are viewed as the ultimate safe havens.
  8. Investing

    MCLOX: BlackRock's Fund That Invests in Stocks & Bonds

    Learn about the BlackRock Global Allocation Fund Investor C Shares mutual fund, its portfolio makeup, and read an analysis of the fund's top five holdings.
Frequently Asked Questions
  1. How did the ABX index behave during the 2008 subprime mortgage crisis?

    Read about the disastrous performance of the various ABX indexes in the subprime mortgage crisis of 2008 during the middle ...
  2. How did moral hazard contribute to the 2008 financial crisis?

    Learn about moral hazard, how it can affect outcomes and how it contributed to the conditions that led to the 2008 financial ...
  3. Which mutual funds made money in 2008?

    Read about the only mutual fund that turned a profit in 2008. Learn about risk-averse investment strategies and the financial ...
  4. Were Collateralized Debt Obligations (CDO) Responsible for the 2008 Financial Crisis?

    Collateralized debt obligations are exotic financial instruments that can be difficult to understand, Learn the role they ...
Trading Center