Treasury Bills, Notes and BondsT-bill
US Treasury securities are debt issued by the US government. Bills mature in a year or less and are sold at a discount; notes mature in 2 to 10 years and bonds in 20 or 30 years, both paying interest every six months.
US Treasuries are among the most traded securities in the world and serve as a benchmark for interest rates everywhere. When people talk about “the 10-year yield”, they mean a Treasury note. Movements in Treasury yields affect mortgage rates, stock valuations, the dollar and borrowing costs worldwide. This entry explains the types of Treasuries, how prices and yields relate, and why traders in every market watch them.
- Category
- Bonds and Interest Rates
- Reading time
- 4 min
- Also called
- Treasury bill, Treasury note, Treasury bond
- Updated
Treasuries in plain words
Buying a Treasury means lending money to the US government. Bills are short loans; notes and bonds are longer and pay interest twice a year.1
Treasury prices and yields move in opposite directions.2 When yields rise, existing bonds lose value. See Interest Rate and Yield to Maturity.
How to read Treasury markets, step by step
Know the maturities
Bills (up to 1 year), notes (2–10 years), bonds (20–30 years).3
Watch key yields
The 2-year tracks rate expectations; the 10-year is a broad benchmark.
Compare yields across maturities
The shape of the curve says something about growth and policy expectations.
Follow auctions
The Treasury sells new debt at scheduled auctions; weak demand can push yields up.
Link to data
Inflation and jobs reports move yields. See Consumer Price Index.
Link to other markets
Rising yields often pressure growth stocks and support the dollar.
Worked examples
Example 1 — A T-bill at a discount
BillA 1-year T-bill with $1,000 face value is bought for $960.
| Interest earned | $40 |
| Approximate yield | $40 ÷ $960 ≈ 4.2% |
Bills pay no coupons; the return is the difference between price and face value.
Example 2 — Price falls when yields rise
Rate riskA 10-year note pays 4% coupons. Market yields for similar notes rise to 5%.
| Existing note’s price | Falls below face value |
Longer maturities fall more for the same rise in yields. See Duration.
Example 3 — Yields and growth stocks
SpilloverThe 10-year yield rises from 4.0% to 4.6% in a month.
| Growth stocks | Often weaken |
Higher yields reduce the present value of distant profits. See Fundamental Analysis.
Bills, notes and bonds
| Aspect | Maturity | Interest |
|---|---|---|
| Treasury bills | Up to 1 year | Sold at a discount; no coupons |
| Treasury notes | 2 to 10 years | Coupons every six months |
| Treasury bonds | 20 or 30 years | Coupons every six months |
| Inflation-protected (TIPS) | Various | Principal adjusts with inflation. See Real Yield |
Why traders watch Treasuries
Rate benchmark
Many other rates are priced from Treasury yields.
Safe-haven flows
Investors often buy Treasuries in crises.
Currency moves
Yield differences affect the dollar. See Carry Trade.
Equity valuation
Yields feed into discount rates.
Advantages and disadvantages
Advantages
- Backed by the US government.
- Extremely liquid market.
- Clear benchmark for interest rates.
Disadvantages
- Prices fall when yields rise.
- Inflation erodes fixed coupons.
- Long maturities are very rate-sensitive.
- Returns may trail riskier assets over long periods.
Going deeper
Read as far as you need. Each level builds on the one before it.
Safe from default, not from price swings
Beginner
Treasuries are considered very low credit risk, but their market prices can still fall a lot when rates rise.4
The yield curve
Intermediate
Plotting yields across maturities gives the yield curve. When short yields exceed long yields, the curve is inverted — often watched as a warning sign for growth. See Recession.
Term premium
Advanced
Long-term yields include expected future short rates plus extra compensation for the risk of lending for longer. Changes in this term premium can move long yields independently of policy.
Common mistakes
Thinking bonds cannot lose money
Prices fall when yields rise.
Confusing price and yield direction
They move opposite.
Ignoring maturity
Longer bonds swing more.
Forgetting inflation
Real returns can be negative.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Treasuries are US government debt.
- Bills ≤1 year at a discount; notes 2–10 years; bonds 20–30 years.
- Prices and yields move in opposite directions.
- The 10-year yield is a global benchmark.
- Low credit risk does not mean low price risk.
Frequently asked questions
What is the 10-year Treasury yield?
Are Treasuries risk-free?
Why do stocks react to Treasury yields?
Further learning
- Interest Rate
What drives Treasury yields.
- Inflation
Why fixed coupons lose real value.
- Federal Reserve
The main influence on short yields.
- Fundamental Analysis
How yields affect valuations.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- TreasuryDirect (U.S. Treasury). Treasury Notes (opens in a new tab) Checked .
- Investor.gov (SEC). Investor Bulletin: Fixed Income Investments — When Interest Rates Go Up, Prices of Fixed-Rate Bonds Fall (opens in a new tab) Checked .
- TreasuryDirect (U.S. Treasury). Treasury Bills (opens in a new tab) Checked .
- Investor.gov (SEC). Treasury Securities (glossary) (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.