What Are Treasury Notes and Bills?
- Treasury notes, also known as "T-Notes," are offered in face values of $1,000, but there are different purchase minimums for each type of security. Depending on what duration of investment you are looking for, Treasury notes are offered with maturities of two, three, five and 10 years. Every quarter the U.S. Treasury auctions off its three-year notes, while it auctions its two-year and five-year notes every month and its 10-year notes six times a year. All Treasury notes pay interest to investors every six months.
- Unlike Treasury notes, Treasury bills do not make interest payments, but they are the only security offered by the U.S. Treasury that sells at a discount. Treasury bills, also known as "T-Bills," are short-term government securities that come in three maturities. There is no fixed interest rate with Treasury bills, as the interest rate is decided at each auction and is contingent on what investors want to pay. The Treasury auction schedule includes the sale of T-Bills with 91-day and 182-day maturities every Monday, and the sale of 364-day T-Bills every four weeks on a Thursday.
- While you can purchase Treasury notes and Treasury bills at banks and independent providers, the U.S. Treasury offers individual investors a chance to purchase directly from the government using a program called Treasury Direct. Depending on how much money is in your Treasury account, Treasury Direct can be cheaper than using an intermediary to complete the sale since there are usually no transactional or broker fees with each purchase.
- Aside from T-Bills and T-Notes, the U.S. Treasury also offers two other types of securities: Treasury Bonds and Treasury Inflation-Protected Securities, also known as TIPS. Like T-Notes, Treasury bonds pay out interest every six months to investors. Treasury Inflation-Protected Securities also pay out interest every six months and are special in that the TIPS principle changes according to fluctuations in the Consumer Price Index.