Treasury Bills
Treasury bills (also known as T-bill) is a short term loan to the federal government. The loan duration is less than 12 months. These have lower rewards and lower risk than other investment options typically. The interest rates are fixed to the rate that is offered for the duration.
At the end of the duration of the Treasury-bill, the government pays the face value. At the beginning, you pay less than face value. These bills can be sold on secondary market before the end of the duration, although when sold on a secondary market it will be less than face value normally.
There investments are considered highly liquored to their duration and ability to sell before duration. The duration of treasury bills ranges from 4, 8, 13, 17, 26, and 52 weeks.
The interest is paid at the end of duration. Federal taxes are paid on the interest earned.
Face value means the value printed on the treasury bill, coin, stamp, ect..
Key Notes:
- Less than 12 months
- Low risk
- Consistent returns
- Only pays federal tax, not state or local.
- Paid at the end of duration.
Treasury Notes
Treasury notes is the middle ground of duration compared to treasury bills and treasury bonds. The duration ranges 2, 3, 5, 7, or 10 years. The treasury notes for 2, 3, 5, and 7 years are offered monthly, although 10 years is only offered 8 times a year. Considered liquid although the longer the duration the more difficult it might be to get rid of.
Federal taxes are due annually on interest earned. Interest is paid every 6 months, at the fixedrate offered.
Key Notes:
- Treasury notes duration ranges 2, 3, 5, 7, or 10 years.
- Interest paid every 6 months.
- Federal taxes are due at the end of each year.
- Liquid
Treasury Bonds
Treasury bonds have much long duration of 20 or 30 years at a fixed rate. There is an option to sell before the maturity date and considered a liquid investement. Although the longer the duration the more difficult it might be to get rid of.
Federal taxes are due annually on interest earned. Interest is paid every 6 months as long as you hold the bond.
Key Notes:
- Duration options are 20 or 30 years.
- Interest paid every 6 months.
- Federal taxes are due at the end of each year.
- Liquid
Similarities of Treasury bills, Treasury notes, and Treasury bonds.
- Set Durations
- Fixed rate for duration.
- Liquid
- Federal taxes are paid but exempt on local and state taxes on interest earned.
- Used for portfolio to balance risk.
Maybe T-bills, T-notes, or T-bonds do not work for you? check out What is a High-Yield Savings Account?, Roth IRA vs Traditional IRA: Understanding the Differences, What is a Certificate of Deposit (CD)?