Loading the player...
A:

Treasury bills (T-Bills), notes and bonds are marketable securities that 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 U.S.

Understanding T-bills

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.

For example, an investor who purchases a T-bill at a discount price of $97 will receive the $100 face value at maturity. The $3 difference represents the interest return on the security.

Treasury Notes and Bonds

Treasury notes and bonds, on the other hand, are securities that have stated interest rates that are paid semi-annually until maturity. What makes notes and bonds different are the terms to maturity. Notes are issued in one-, three-, five-, seven- 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, read An Introduction to Treasury Securities, The Basics of the T-Bill, and our Money Market Tutorial. For further reading on bonds, see our Bonds Basics Tutorial.

RELATED FAQS
  1. Treasury Bond vs Treasury Note vs Treasury Bill

    Understand the types of securities the government issues. Learn the difference between Treasury notes (T-notes), Treasury ... Read Answer >>
Related Articles
  1. Investing

    The Basics Of The T-Bill

    The U.S. government has two primary methods of raising capital. One is by taxing individuals, businesses, trusts and estates; and the other is by issuing fixed-income securities that are backed ...
  2. Investing

    Introduction to Treasury Securities

    Purchasing Treasury securities backed by the U.S. government and knowing their characteristics can provide a steady guaranteed income and peace of mind.
  3. Investing

    How To Read A T-Bill Quote

    Treasury bills, or "T-bills," are debt obligations issued by the U.S. government. Learning how to read the quotes is the first step to start trading.
  4. Investing

    Find the Right Bond at the Right Time

    Learn about the types of bonds you should consider investing in, when you should be buying them and how to compare yields against their time to maturity.
  5. Investing

    Investing Basics: Flight To Quality

    At times of market stress, investors flee from risky assets to investments the safest ones available.
  6. Investing

    The 3 Largest U.S. Government ETFs (TIP, SHY)

    Learn about the benefits of U.S. government ETFs, and explore the three largest government funds available on the market as of March 2016.
  7. 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.
RELATED TERMS
  1. 10-Year Treasury Note

    A 10-year Treasury note is a debt obligation issued by the United ...
  2. Federally Guaranteed Obligations

    Federally guaranteed obligations are debt securities issued by ...
  3. Term To Maturity

    In bonds, term to maturity is the time between when a bond is ...
  4. Government Security

    A government security is a bond (or debt obligation) issued by ...
  5. Average Effective Maturity

    For a single bond, the average effective maturity is a measure ...
  6. Guaranteed Investment (Interest) Certificate (GIC)

    A guaranteed investment (interest) certificate is a deposit investment ...
Trading Center