What Are Treasury Bonds? Bills, Notes, and Bonds Explained
When you buy a Treasury security, you're lending money directly to the US government, and it's paying you back with interest. It's one of the safest trades in the entire financial system.
Unction Trade Academy•10 min read•Updated July 2026
"Treasury bonds" is the phrase most people use casually, but the US government actually issues several different types of debt, and the differences matter. Buy one, and you're lending the government money for a fixed period, in exchange for regular interest and your full principal back at the end.
The Treasury Family, Side by Side
People often say "Treasury bond" to mean any government security, but technically, "bond" refers only to the longest-term type. Here's the full family:
Type
Maturity
How It Pays
T-Bills
4 weeks – 1 year
Sold at a discount, full value paid at maturity
T-Notes
2 – 10 years
Fixed interest every 6 months
T-Bonds
20 – 30 years
Fixed interest every 6 months
TIPS
5, 10, or 30 years
Principal adjusts with inflation, plus interest
I Bonds
Up to 30 years
Combined fixed + inflation rate, not tradeable
Notes and bonds work the same way, just at different lengths, they pay you a fixed coupon twice a year and return your full principal at maturity. Bills are simpler: you buy one for less than its face value and collect the difference when it matures.
The Yield Curve, Explained Visually
The "yield curve" just plots the interest rate you earn against how long you're lending your money for. Normally, longer loans pay more, since you're taking on more uncertainty over time:
Normal: longer-term pays more
Inverted: short-term pays more
When the curve flips, short-term rates paying more than long-term ones, it's called an inverted yield curve, and it's widely watched because it has historically preceded economic slowdowns. It's not a perfect predictor, but it's one of the most closely tracked signals in all of finance.
How to Actually Buy Treasuries
Directly via TreasuryDirect
The US government's own platform, no middleman, no fees. But it requires a Social Security number and a US address to open an account, which rules it out for most investors living outside the US.
Through a Brokerage
Most major brokers let you buy Treasuries at auction or on the secondary market inside a regular brokerage account, often the more realistic route for international investors who already have broker access.
Worth knowing if you're investing from outside the US: TreasuryDirect's SSN-and-US-address requirement is a real barrier for diaspora investors. The workaround most people use is buying Treasuries through a brokerage account instead, which is one more reason having access to a broker that actually accepts international clients matters as much as the investment itself.
Taxes on Treasury Interest
Treasury interest is taxed as ordinary income at the federal level, but it's exempt from state and local income tax, a real advantage if you live somewhere with high state taxes. This exemption is one of the quieter reasons Treasuries can out-earn a similarly-rated CD after taxes, even when the stated rate looks similar.
$100
Typical minimum purchase, in $100 increments
Twice a Year
How often notes and bonds pay interest
0% Default Risk
Backed by the full faith and credit of the US government
The Risks to Know
Interest rate risk: if you sell before maturity and rates have risen since you bought, your bond's market value will have fallen. Hold to maturity, and this doesn't affect you.
Inflation risk: a fixed-rate bond's real value can be eroded if inflation runs hotter than expected, this is exactly the problem TIPS are designed to solve.
Opportunity cost: locking into a long-term bond means missing out if rates rise significantly afterward.
Model What a Treasury Could Actually Earn You
See real returns across different terms with our free calculator.
They carry effectively no default risk, since they're backed by the US government, but they're not risk-free overall, interest rate risk and inflation risk still apply, especially if you sell before maturity.
What's the difference between a Treasury bond and a Treasury note?
Only the length: notes mature in 2 to 10 years, bonds in 20 or 30. Both pay a fixed rate every six months.
Can non-US residents buy Treasury bonds?
Not directly through TreasuryDirect, which requires a Social Security number and US address. Many non-US residents buy Treasuries instead through a brokerage account with a firm that accepts international clients.
What does an inverted yield curve mean?
It means short-term Treasuries are paying more than long-term ones, the reverse of the usual pattern. It's historically been watched as an early warning sign for economic slowdowns, though it isn't a guarantee.
This article is for educational purposes only and does not constitute investment, financial, or tax advice. Unction Trade is not a registered investment advisor. See our full Investment Disclaimer.
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