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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.

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, 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 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.

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