What is the Difference Between Treasury Bills and Notes?
🆚 Go to Comparative Table 🆚The main differences between Treasury bills and Treasury notes are their maturity periods and interest payment structures. Both are government-backed debt securities issued by the U.S. Treasury, but they vary in terms of interest payment frequency and maturity dates.
Treasury Bills:
- Maturity: Less than one year, with specific maturities available in four weeks, eight weeks, 13 weeks, 17 weeks, 26 weeks, and 52 weeks.
- Interest Payment: Unlike Treasury notes and bonds, Treasury bills do not pay periodic interest payments. 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 Notes:
- Maturity: Generally issued with maturities of 2, 3, 5, 7, or 10 years.
- Interest Payment: Treasury notes pay interest every six months until they mature. The interest rate is determined at auction, and upon maturity, Treasury notes pay the face value of the security.
Comparative Table: Treasury Bills vs Notes
Here is a table summarizing the differences between Treasury Bills, Notes, and Bonds:
| Feature | Treasury Bills | Treasury Notes | Treasury Bonds |
|---|---|---|---|
| Definition | Debt instruments with maturities of less than one year | Debt instruments with maturities of 2 to 5 years | Debt instruments with maturities of 20 to 30 years |
| Interest Payment | None (purchased at a discount to face value) | Paid every six months until maturity | Paid every six months until maturity |
| Maturity | 4, 8, 13, 26, and 52 weeks | 2, 3, 5, 7, and 10 years | 20 to 30 years |
| Risk | Low, virtually risk-free | Lower than Treasury Bonds | Higher than Treasury Notes |
| Coupon Rate | Not applicable | Lower than Treasury Bonds | Higher than Treasury Notes |
| Tax Implications | Exempt from state and local taxes | Exempt from state and local taxes | Exempt from state and local taxes |
| Purchase | Directly from the U.S. government at TreasuryDirect.gov or through a broker | Directly from the U.S. government at TreasuryDirect.gov or through a broker | Directly from the U.S. government at TreasuryDirect.gov or through a broker |
The main differences between Treasury Bills and Notes lie in their maturities, payment structures, and risk profiles. Treasury Bills are short-term investments with maturities of one year or less, and Treasury Notes are intermediate-term investments with maturities of 2 to 5 years. Treasury Bills do not pay interest, while Treasury Notes do. Both Treasury Bills and Notes are considered low-risk investments backed by the U.S. government.
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