What is the Difference Between Treasury Bills and Bonds?

Treasury bills and bonds are both fixed-income securities issued by the U.S. government, but they differ in terms of maturity, interest payments, and risk. Here are the main differences between the two:

1. Maturity: Treasury bills have short-term maturities, typically ranging from a few weeks to one year. On the other hand, Treasury bonds have long-term maturities, usually 20 or 30 years.
2. Interest Payments: Treasury bills do not pay periodic interest payments like Treasury bonds and notes. Instead, they are sold at a discount to their face value, and the investor's return is the difference between the face value and the discount price paid at auction. Treasury bonds, however, pay interest every six months.
3. Yield: Currently, Treasury bills have higher interest rates than bonds but guarantee a return for a much shorter period. Treasury bonds provide consistent interest income but are currently yielding less than Treasury bills.
4. Risk Tolerance: Treasury bills are generally considered a better choice for short-term investments, as they enable you to re-invest into other investments. Treasury bonds are more suitable for longer-term investments if you don't require large returns and have a lower risk tolerance.

In summary, Treasury bills are short-term investments with higher interest rates and no periodic interest payments, while Treasury bonds are long-term investments with lower interest rates and periodic interest payments. The choice between the two depends on your investment time horizon and risk tolerance.

Comparative Table: Treasury Bills vs Bonds

Here is a table summarizing the differences between Treasury Bills and Bonds:

Treasury Bills are short-term debt obligations issued by the U.S. Treasury with a maturity of less than one year. They are sold at a discount to their face value, and the investor's return is the difference between the face value and the discount price paid at auction. Treasury Bonds, on the other hand, are long-term debt instruments with maturities of 20 or 30 years. They are sold at par and pay periodic interest payments to investors. The main differences between Treasury Bills and Bonds lie in their maturities, yield and risk profiles, and pricing mechanisms. Both Treasury Bills and Bonds are virtually risk-free, as they are backed by the full faith and credit of the U.S. government.