Hello and welcome to TreasuryDirect.
Let's talk about Treasury Bills, Treasury Notes, and Treasury Bonds.
These are all forms of Marketable Securities.
If you are new to the Marketable Securities world, I would recommend
you watch the video titled What Are Marketable Securities?
which can be found on the same page as this video.
Let's start with Treasury Bills.
These are short term Securities being offered in terms of four, eight,
13, 17, 26, and 52 weeks.
These are typically sold below par amount and the interest earned is calculated
based on the difference between the purchase price and the par amount.
The greater the difference between the purchase price and the par amount,
the greater returns you earn on the Securities.
You do need to purchase these Securities in increments of $100
up to the noncompetitive limit of $10 million per auction.
The shorter term Bills are auctioned each week,
while the 52 week Bills are auctioned every four weeks.
When a Bill reaches maturity,
you will need to report the interest earned as federal income tax.
A 1099 will appear in your TreasuryDirect account the following January.
Treasury Notes
are a medium term Security being offered in two, three,
five, seven and ten year terms.
The interest rate for these Notes will be set at the auction
based on the competitive bids received. Like the Bills we discussed earlier.
You must purchase in increments of $100 up
to the $10 million limit per auction.
One thing that makes the Notes different from
Bills is the way interest is earned.
The interest rate is set at auction
and remains fixed for the life of the Note.
Interest is accrued on the Note and is paid out every six months,
which will need to be reported as earned income on your federal taxes.
Treasury Bonds are a long term
Security with terms of 20 and 30 years.
These are not the same as Savings Bonds, such
as the Series EE or I.
Those Savings Bonds are not able to be bought
or sold through the secondary market,
unlike Treasury Bonds, which can be bought or sold through the marketplace
typically by a broker or dealer. Like the Notes, the Treasury Bonds
earn interest over the life of the Bond, which is paid out every six months.
Because you cannot redeem Treasury Notes or Bonds prior to their maturity date,
the only way to cash them out before the end of their term
is to sell them on the secondary market. Like the Note,
interest is accrued on the Bond and is paid out every six months,
which will need to be reported as earned income on your federal taxes.
More information can be found for each type of Marketable
Security on the TreasuryDirect.Gov website
under the Treasury Marketable Securities tab.
And that's it.
That is the basics of Treasury Bills, Notes, and Bonds.