The United States government borrows by selling securities, and the securities it sells to the public are the safest investments in the world in the specific sense that matters: the borrower can always pay, because it issues the currency the debt is denominated in. That safety is why Treasury securities anchor the whole financial system — their yields are the “risk-free rate” every other investment is priced against — and why they are also a practical savings vehicle for individuals, bought directly from the government with no intermediary. The family has five members, and the differences between them are term, coupon, and inflation treatment. This guide takes them one at a time, and it prints no live yields: yields move daily, and the only current figure is the auction result or the market price on the day.

The family: bills, notes, bonds, TIPS, FRNs, savings bonds

Treasury bills are the short end: 4, 8, 13, 17, 26 and 52-week maturities, sold at a discount to face value, with no coupon payments — a $100 bill bought for $98 returns $100 at maturity, and the $2 is the interest. Treasury notes run 2, 3, 5, 7 and 10 years, pay a fixed coupon every six months, and are sold at or near face value. Treasury bonds run 20 and 30 years on the same coupon structure, at the longest end of the curve. TIPS (Treasury Inflation-Protected Securities) are notes and bonds whose principal is adjusted for CPI inflation, with the coupon paid on the adjusted principal — the interest rises with inflation, and at maturity the holder receives the inflation-adjusted principal or the original principal, whichever is higher. FRNs (floating rate notes, 2-year) pay a coupon that resets weekly off the 13-week bill rate, so their price barely moves when rates change. Savings bonds — Series EE and Series I — are the non-marketable members: bought from the Treasury, held by the owner, redeemed with the Treasury, never traded.

The distinction that organises the family is marketable versus non-marketable. Marketable securities (bills, notes, bonds, TIPS, FRNs) can be sold before maturity in the secondary market, at whatever price the market sets — which means their value fluctuates, and a note sold before maturity can return less than was paid for it. Non-marketable securities cannot be sold; they are redeemed with the Treasury at their accrued value, which never falls. The safety of a Treasury security is therefore two different safeties: held to maturity, the return is certain (in nominal terms for ordinary securities, in real terms for TIPS and I bonds); sold early, a marketable security’s return depends on the market that day.

Buying: the auction, TreasuryDirect, and the secondary market

Marketable securities are sold at auction on a published schedule — bills weekly, notes and bonds monthly, on dates TreasuryDirect publishes a year ahead. Two kinds of bid exist. A non-competitive bid accepts whatever yield the auction sets, and is guaranteed to be filled up to $10 million per auction; it is the individual’s route, with a $100 minimum in $100 increments. A competitive bid states a yield, and is filled only if the bid is at or below the auction’s high yield — the route of dealers and institutions. The auction’s high yield becomes the yield for all non-competitive buyers, and the price is set from it. Individuals buy through TreasuryDirect (the Treasury’s own site, no fees) or through a broker or bank, which may charge a fee or a spread on the secondary market.

Savings bonds are bought only through TreasuryDirect, from $25, in any amount to the annual purchase limit ($10,000 per person per series per year electronically, plus up to $5,000 of paper I bonds with a tax refund). They cannot be redeemed in the first 12 months, and redeeming before five years forfeits the last three months’ interest — the early-redemption penalty that makes the effective yield of a short holding lower than the stated rate. The Treasury calculation on this site models an I bond — the savings-bond member of the family, with its composite rate and its redemption rules — and the article’s marketable-security figures are context for that model, not outputs of it.

Yield, price, and the seesaw

A marketable security’s price and its yield move in opposite directions, always. A note issued at $100 with a 4% coupon pays $4 a year; if market yields rise to 5%, no buyer will pay $100 for $4 a year when $100 buys $5 elsewhere, so the note’s price falls until its $4 coupon plus the gain to maturity equals a 5% return — to roughly $96 for a note with a few years left. If yields fall to 3%, the price rises above $100 for the mirror reason. The relationship is exact for a given maturity and coupon, and it is the whole content of bond price risk: the longer the maturity, the larger the price move for a given yield change, which is why a 30-year bond’s price swings far more than a 2-year note’s on the same news.

Three yield figures are quoted and mean different things. The coupon rate is the annual interest as a percentage of face value — fixed at issue. The current yield is the coupon divided by the current price. The yield to maturity is the total return if the security is held to maturity, combining the coupons and the gain or loss to face value. The auction’s high yield is a yield to maturity, and the yields quoted in the press are yields to maturity. None of them is printed in this guide, because all of them are dated the day they are quoted and stale the day after.

Inflation protection: TIPS and I bonds

TIPS protect against inflation by adjusting the principal. A $1,000 TIPS with 2% inflation becomes $1,020 of principal, and the coupon — say 1% — is paid on $1,020, not $1,000, so the interest payment rises with inflation too. At maturity the holder receives the adjusted principal, or the original $1,000 if deflation took the adjusted principal below it — the deflation floor, which applies at maturity, not along the way (the principal can fall during deflationary periods, and the coupon with it). The quoted yield on a TIPS is a real yield: the return above inflation, with inflation added on top through the principal adjustment.

I bonds protect differently: the composite rate combines a fixed rate, set at purchase and held for the bond’s life, with an inflation rate adjusted every May and November from CPI. The bond’s value never falls — it accrues monthly and compounds semiannually — and it is exempt from state and local tax, with federal tax deferrable until redemption and excludable when the proceeds pay for qualifying education expenses under the income limits. The two instruments answer different needs: TIPS are marketable, tradeable, and suitable inside a portfolio that is rebalanced; I bonds are non-marketable, redeemable only with the Treasury, and suitable as a savings vehicle that must never fall in value. The calculator’s I-bond model reflects the second instrument’s rules, including the 12-month lockup and the three-month interest penalty before five years.

Taxes, ladders, and the role in a portfolio

Treasury interest is exempt from state and local income tax — a material advantage in high-tax states, and the reason a Treasury yield that looks lower than a bank deposit’s can be higher after tax. It is subject to federal income tax, and savings-bond interest can be deferred until redemption. The tax treatment is one reason Treasury bills compete with money-market funds for cash holdings, and why the comparison between a Treasury yield and a deposit rate must be made after tax, at the holder’s marginal rates, not before.

A ladder — bills or notes maturing at staggered intervals, with each maturity reinvested at the long end — turns the yield curve’s shape into a steady income: some money always maturing, some always invested, and the average yield tracking the market with a lag. Ladders are the practical form of Treasury investing for individuals who want income without timing the market, and they are built from the auction schedule, one rung at a time. In a portfolio, Treasury securities are the ballast: the asset whose value rises when risk assets fall, whose income is certain in nominal terms, and whose presence lets the rest of the portfolio take the risks it is paid to take.

Frequently asked questions

What is the difference between a Treasury bill, note, and bond?

Term and coupon. Bills mature in 4 to 52 weeks, pay no coupon, and are sold at a discount — the return is the difference between the price and the $100 face value. Notes run 2 to 10 years and bonds 20 to 30 years, both paying a fixed coupon every six months. All three are marketable: they can be sold before maturity at the market price.

How do I buy Treasury securities?

Marketable securities are bought at auction through TreasuryDirect (minimum $100, in $100 increments, non-competitive bids up to $10 million) or through a broker on the secondary market. Savings bonds are bought only through TreasuryDirect, from $25. Bills are auctioned weekly, notes and bonds monthly, on a published schedule.

What are TIPS?

Treasury Inflation-Protected Securities: notes and bonds whose principal is adjusted for CPI inflation, with the coupon paid on the adjusted principal. The quoted yield is a real yield — the return above inflation. At maturity the holder receives the adjusted principal or the original principal, whichever is higher, which is the deflation floor.

What is an I bond?

A non-marketable savings bond whose composite rate combines a fixed rate (set at purchase, held for life) with an inflation rate adjusted every May and November. Its value never falls, it cannot be redeemed in the first 12 months, and redeeming before five years forfeits three months’ interest. Interest is exempt from state and local tax and federally deferrable until redemption.

Are Treasury securities taxed?

Interest is subject to federal income tax but exempt from state and local income tax. Savings-bond interest can be deferred until redemption and may be excludable when the proceeds pay for qualifying education expenses under the income limits. The state exemption is material in high-tax states and should be included in any comparison with bank deposits.

Can I lose money on a Treasury security?

Held to maturity, a marketable Treasury security returns its face value plus coupons with certainty in nominal terms. Sold before maturity, its price depends on the market that day, and a rise in yields since purchase means a sale below what was paid. Savings bonds cannot be sold and never redeem below their accrued value. Inflation is the remaining risk for ordinary nominal securities: the return is certain in dollars, not in purchasing power.