Why Treasuries matter
Treasury securities are the benchmark for borrowing costs across the economy. Their yields influence mortgage rates, corporate bonds and the way investors value stocks.
The main types
- Treasury bills (T-bills): terms of up to one year. They pay no coupon; you buy at a discount and receive face value at maturity.
- Treasury notes: terms of 2, 3, 5, 7 and 10 years with interest every six months.
- Treasury bonds: 20 and 30 years with interest every six months.
- TIPS: Treasury Inflation-Protected Securities, whose principal adjusts with inflation.
- Series I savings bonds: sold to individuals with a rate that combines a fixed part and an inflation part.
How to buy
You can buy directly through TreasuryDirect.gov, through a brokerage, or indirectly with Treasury ETFs and mutual funds. Auctions set the yield; at a brokerage you can also buy existing Treasuries on the secondary market.
Risks to remember
“Very low default risk” does not mean no risk. Longer Treasuries can fall in price when rates rise (see bond prices and interest rates), and inflation can erode fixed payments.
The yield curve
Plotting Treasury yields from short to long maturities makes the yield curve, a widely watched economic indicator.
Quick answers
Are Treasuries tax free?
Federal tax applies. They are exempt from state and local income tax. Check irs.gov and your state.