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Ask a Fool: What's the Difference Between Treasury Bills, Bonds, and Notes?

By Matthew Frankel, CFP® – Updated Apr 19, 2018 at 5:37PM

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There's one major difference: time.

Q: I've heard Treasury securities referred to as "bonds," "notes," and "bills." What's the difference?

There are lots of similarities among these three types of fixed-income investments. All three are backed by the U.S. government, and can be purchased through your broker or directly from the U.S. Treasury at

The primary difference between them is the time each one takes to mature. Additionally, one has a different interest-payment structure than the other two.

First, Treasury bills mature in a year or less. Because of their short duration, these securities don't make regular interest payments -- after all, bonds generally pay every six months, so what would a 90-day Treasury bill do? Instead, Treasury bills are sold at a discount to their face value, and investors get the full amount upon maturity.

As an example, a Treasury bill may be sold for $99 with a face value of $100. The additional $1 given at maturity represents the "interest" paid by to the investor.

Treasury notes have maturities from two to 10 years, while Treasury bonds have maturities of greater than 10 years. These both pay interest semiannually, and the only real difference between Treasury notes and bonds is their maturity length.

Generally speaking, the longer the maturity of a Treasury security, the higher the annual yield it will pay, all other factors being equal. For example, a 30-year Treasury bond can be expected to have a higher annual yield than a 10-year Treasury note issued at the same time, which would in turn yield more than a 26-week Treasury bill.

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