T-Bills, T-Notes, and T-Bonds are three forms of bonds issued by the U.S. Treasury.

The Treasury issues these bonds in order to raise money for the operations of the government of the United States. Since the U.S. federal government is the issuer of these bonds, they are some of the safest investments you can find. However, the sureness of the bond comes at a price. These investments have a low yield. On the risk/reward scale, investments in Treasury bonds are low on risk and low on return.

These different Treasury bonds share a few simple characteristics.

One added benefit is that they are exempt from state and local taxes, though federal taxes are still payable.

They cannot be redeemed prior to maturity, and in most cases they do not have call provisions. A call provision would allow the Treasury to pay off the bond early if it is to their advantage.

You can buy the bonds directly from the Treasury, or you can buy them through a broker. If you buy then from a broker it is possible to resell them prior to maturity in a secondary market.

Treasury Bonds, Bills, and Notes are all issued in face values of $1,000, though there are different purchase minimums for each type of security.

The three types of bonds are differentiated by their securities.

Treasury Bills have maturities of one year or less.
Treasury Notes have maturities of two to ten years.
Treasury Bonds have maturities greater than ten years.

Now for the specific characteristics of each of the three types of bond.

Treasury Bills are issued in three maturities. Bills with 91-day and 182-day maturities are auctioned by the Treasury each Monday. 364-day Bills are auctioned every four weeks on Thursday, 13 times a year. The interest rate of T-Bills is determined at each auction, depending on what bidders are willing to pay. T-Bills do not make interest payments, however. Instead, they are purchased at a discount to face value. They are the only Treasury securities that sell at a discount.

U.S. Treasury Notes are issued in two, five, and ten year maturities. The two year and five year Notes are auctioned each month, while ten year Notes are auctioned eight times a year. All Notes pay interest twice a year, and expire at par value.

Treasury Bonds are usually issued in thirty-year maturities, and pay interest twice a year.

As an investor you can reduce your costs by buying direct from the Treasury, and it is easier to do with the advent of the internet. At TreasuryDirect.gov you can purchase Bills, Notes, and Bonds, and track their progress to maturity.

Each type of bond offers a high degree of safety, but the return on this investment is significantly lower over time than investments in stocks, for example. For the sake of diversity with an emphasis on safety, Treasury bonds are worthy of consideration for your portfolio.

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