Quick answer
They differ by term. Treasury bills mature in 4 to 52 weeks and pay no coupon — you buy below face value. Notes mature in 2 to 10 years and bonds in 20 or 30 years; both pay fixed interest every six months [1] [2] [3].
Key points
- Bills: 4 to 52 weeks, sold at a discount or at par, face value paid at maturity.
- Notes: 2, 3, 5, 7 or 10 years, fixed interest every six months.
- Bonds: 20 or 30 years, fixed interest every six months.
- Minimum purchase is $100 in $100 steps; you buy at auction through TreasuryDirect or a bank, broker or dealer.
- Interest is subject to US federal income tax but not state or local income tax (TreasuryDirect, 2026).
#What do bills, notes and bonds have in common?
All three are Treasury marketable securities: loans you make to the US government that can be bought at auction and sold to other investors before they mature [4]. Investor.gov describes Treasury securities as debt obligations issued by the US Department of the Treasury and notes that they are backed by the full faith and credit of the US government [5]. The basic bond vocabulary — face value, coupon, maturity — is explained in what a bond is.
The names are about length. A bill is short, a note is medium, a bond is long. That length changes two things: how interest is paid, and how much the price can swing if interest rates move before maturity.
| Feature | Bills | Notes | Bonds |
|---|---|---|---|
| Terms sold | 4, 6, 8, 13, 17, 26 and 52 weeks | 2, 3, 5, 7 or 10 years | 20 or 30 years |
| How you earn | Bought at a discount or at par; paid face value at maturity | Fixed rate, paid every six months | Fixed rate, paid every six months |
| Rate set | At auction | At auction; never less than 0.125% | At auction; never less than 0.125% |
| Minimum / steps | $100 / $100 | $100 / $100 | $100 / $100 |
| Max non-competitive bid | $10 million | $10 million | $10 million |
| US taxes on interest | Federal yes; state and local no | Federal yes; state and local no | Federal yes; state and local no |
The rows for notes and bonds come from TreasuryDirect's notes and bonds pages [2] [3]; the terms match the Treasury's tentative auction schedule for August 2026 to February 2027 [6]. Two related Treasury products use the same auction system: TIPS, whose principal adjusts with inflation, and floating rate notes. TIPS are covered with I bonds in TIPS and I bonds explained.
#How does a Treasury bill pay you without a coupon?
Bills do not make interest payments along the way. TreasuryDirect explains that bills are sold at a discount or at par, and when the bill matures you are paid its face value; for bills, "interest" is the difference between what you paid and the face value you receive [1]. The Treasury publishes the formula for the price: Price = Face value × (1 − (discount rate × days) ÷ 360) [7] [8]. Its own example is a $1,000 26-week bill at a 0.145% discount rate, priced at $999.27 [7] — a result we reproduced in Python.
Worked example
Worked example: a $1,000 bill at a 4% discount rate
Hypothetical auction result: a 4.00% discount rate for a $1,000 face value bill. Prices use TreasuryDirect's formula with 28, 91, 182 and 364 days for the 4-, 13-, 26- and 52-week terms.
- 4-week bill: 1,000 × (1 − 0.04 × 28 ÷ 360)
- $996.89 → earns $3.11
- 13-week bill: 1,000 × (1 − 0.04 × 91 ÷ 360)
- $989.89 → earns $10.11
- 26-week bill: 1,000 × (1 − 0.04 × 182 ÷ 360)
- $979.78 → earns $20.22
- 52-week bill: 1,000 × (1 − 0.04 × 364 ÷ 360)
- $959.56 → earns $40.44
You pay less than $1,000 today and receive $1,000 at maturity. The gap is your interest. The longer the term, the bigger the discount at the same rate.
Calculated in Python. The 4% rate is an illustration, not a current auction result. The discount rate understates the return on the money you actually pay, so the bill's yield is slightly higher than 4%.
#How do notes and bonds pay interest?
Notes and bonds work like the classic bond. TreasuryDirect states that both pay a fixed rate of interest every six months until they mature, with the rate fixed at auction and never less than 0.125% [2] [3]. The price at auction can be at, above or below face value: if the yield to maturity set at auction is higher than the interest rate, the price is below par; if it is lower, the price is above par [7]. That link between price and yield is explained in why bond prices fall when rates rise.
Bill vs note: how the money flows
26-week bill
- Pay about $979.78 today (at a 4% discount rate)
- No payments in between
- Receive $1,000 after 26 weeks
10-year note, 4% coupon
- Pay about $1,000 today (if priced at par)
- Receive $20 every six months — 20 payments, $400 in total
- Receive $1,000 at maturity
#How do you buy Treasuries?
New Treasury marketable securities are sold at auction. TreasuryDirect says you can bid through your TreasuryDirect account (non-competitive bids only) or through a bank, broker or dealer (competitive or non-competitive) [4]. A non-competitive bid means you accept the rate set at the auction and you get the full amount you bid for; a competitive bid names the rate you will accept and may get some, all or none of what you asked for [4]. Every Treasury marketable security requires a minimum bid of $100, in $100 increments, up to $10 million for a non-competitive bid [4] [8].
Buying a Treasury in TreasuryDirect (non-competitive)
Open an account
You need a TreasuryDirect account to buy there [4].
Choose the security and amount
Use the Buy Direct tab, pick the bill, note or bond, and enter an amount in $100 steps [4].
Wait for the auction
You do not know the rate when you schedule the purchase; it is set at auction, and results appear after 5 PM Eastern time on auction day [4].
Fund the purchase
Make sure the linked bank account has enough money before the issue date [4].
Hold or sell later
Securities bought in TreasuryDirect cannot be transferred for 45 calendar days after the issue date, or for the security's term if that is shorter [4] [9].
#How are Treasury interest payments taxed?
For bills, notes and bonds, TreasuryDirect lists federal tax due on interest earned and no state or local taxes (as of its pages checked on 2026-10-03) [1] [2] [3]. Investor.gov makes the same point: income may be exempt from state and local taxes but federal taxes still apply [5], and IRS Publication 550 states that interest on US obligations is subject to federal income tax but exempt from all state and local income taxes [10]. Your own situation can differ, so check current IRS guidance or a tax professional.
#Which risks remain with Treasuries?
FINRA describes US Treasury securities as generally deemed to be free of default risk [11]. That does not make their market price fixed. If you sell a note or bond before maturity after rates have risen, you may get less than you paid, and long bonds swing the most. Inflation can also reduce what fixed payments buy. Because bills mature within a year, their price has little time to drift, which is why people sometimes compare them with other places to keep money for a near-term purpose, such as an emergency fund — a matter of fit, not a recommendation.
Common beginner mistakes
Expecting a coupon from a bill
Bills pay nothing until maturity. Your return is built into the discounted purchase price.
Confusing Treasury bonds with savings bonds
Treasury bonds are marketable 20- or 30-year securities. EE and I savings bonds are a different product with their own purchase limits and holding rules.
Assuming you know the rate when you place the order
In TreasuryDirect, the rate is set at auction after you schedule the purchase. A non-competitive bid accepts whatever rate the auction produces.
Planning to sell immediately after buying in TreasuryDirect
New securities bought there cannot be transferred for 45 calendar days after the issue date (or for their term, if shorter).
What's the bottom line?
Bills, notes and bonds are the same promise from the same borrower, cut to different lengths. Bills trade a coupon for a discount and mature within a year; notes and bonds pay fixed interest twice a year for 2 to 30 years. All start at $100 at auction. The longer the term, the more the price can move before maturity — see bond yields explained to compare what each actually earns.
Frequently asked questions
What is the minimum amount I can put into a Treasury bill, note or bond?
TreasuryDirect lists a $100 minimum purchase, in $100 increments, for bills, notes and bonds.
Can I sell a Treasury before it matures?
Yes. TreasuryDirect says you can hold bills, notes and bonds to maturity or sell them before. The price you get depends on market rates at the time, and securities bought in TreasuryDirect cannot be transferred for 45 calendar days after the issue date (or for their term, if shorter).
Do I pay state income tax on Treasury interest?
According to TreasuryDirect's pages checked in October 2026, interest on bills, notes and bonds is subject to US federal tax but not state or local income tax. Check current rules for your situation.
Why does the bill's yield differ from its discount rate?
The discount rate is applied to the face value, but you pay less than face value. Measured against the money you actually paid, your return is slightly higher than the discount rate.
Sources
Grade A = primary source (regulator, government agency, official rulebook or the index provider's own documents). Numbers in brackets in the text point here.
- U.S. Department of the Treasury — TreasuryDirect. Treasury Bills (2026). Accessed 2026-10-03.A
- U.S. Department of the Treasury — TreasuryDirect. Treasury Notes (2026). Accessed 2026-10-03.A
- U.S. Department of the Treasury — TreasuryDirect. Treasury Bonds (2026). Accessed 2026-10-03.A
- U.S. Department of the Treasury — TreasuryDirect. Buying a Treasury Marketable Security (2026). Accessed 2026-10-03.A
- U.S. SEC — Investor.gov. Treasury Securities (glossary) (2026). Accessed 2026-10-03.A
- U.S. Department of the Treasury. Tentative Auction Schedule of U.S. Treasury Securities (August 5, 2026 – February 2, 2027) (2026). Accessed 2026-10-03.A
- U.S. Department of the Treasury — TreasuryDirect. Understanding Pricing and Interest Rates (2026). Accessed 2026-10-03.A
- Electronic Code of Federal Regulations (eCFR). 31 CFR Part 356 — Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds (Uniform Offering Circular) (2026). Accessed 2026-10-03.A
- Electronic Code of Federal Regulations (eCFR). 31 CFR 363.203 — Transfer hold period for marketable securities bought in TreasuryDirect (2026). Accessed 2026-10-03.A
- Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses (2025). Accessed 2026-10-03.A
- FINRA. Bonds (2026). Accessed 2026-10-03.A
This page is general education, not personal financial, tax or legal advice. Figures in worked examples are hypothetical and calculated before taxes and fees unless stated. Rules and limits change; check the linked primary sources for the current version. How we check every page.
