Basics of Treasury Securities

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What are U.S. Treasury securities?

U.S. Treasury securities are debt instruments. The U.S. Department of the Treasury issues securities to raise the money needed to operate the federal government.

Why should I buy a Treasury security?

Treasury securities are a safe and secure investment option because the full faith and credit of the U.S. government guarantees that interest and principal payments will be paid on time. Also, most Treasury securities are liquid, which means they can easily be sold for cash.

What types of securities do you sell to individual investors?

We sell Treasury bills, notes, bonds, TIPS, and U.S. Savings Bonds to individual investors.

What are Treasury bills?

Treasury bills (or T-bills) are short-term securities that mature in one year or less from their issue date. You buy T-bills for a price less than their par (face) value, (or sometimes at par value), and when they mature, Treasury pays you their par value. Your interest is the difference between the purchase price of the security and what we pay you at maturity (or what you get if you sell the bill before it matures). For example, if you bought a $10,000, 26-week Treasury bill for $9,750 and held it until maturity, your interest would be $250.

What are Treasury notes, bonds, and TIPS?

Treasury notes and bonds are securities that pay a fixed rate of interest every six months until your security matures, which is when we pay you their par value. The only difference between them is their length until maturity. Treasury notes mature in more than a year, but not more than 10 years from their issue date. Bonds, on the other hand, mature in more than 10 years from their issue date.

Treasury also sells Treasury Inflation-Protected Securities (TIPS). They pay interest every six months and the principal value of TIPS is adjusted to reflect inflation as measured by the Consumer Price Index - the Bureau of Labor Statistics' Consumer Price Index for All Urban Consumers (CPI-U). With TIPS, we calculate your semi-annual interest payments and maturity payment based on the inflation-adjusted principal value of your security.

What are U.S. Savings Bonds?

Savings bonds are Treasury securities that are payable only to the person to whom they are registered. Savings bonds earn interest for up to 30 years, but you can redeem them after one year.

What types of savings bonds are available?

You can buy two types of savings bonds: the Series EE Bond or the Series I Bond. Read more information about these types of securities and compare I and EE Savings Bonds.

How do Treasury bills, notes, bonds, and TIPS differ from savings bonds?

Unlike savings bonds, Treasury bills, notes, bonds, and TIPS are transferable, so you can buy or sell them in the securities market. Also, savings bonds are issued in electronic and paper form, whereas Treasury bills, notes, bonds, and TIPS are issued in electronic form only. You can buy Treasury bills, notes, bonds, and TIPS for a minimum of $100, and you can buy savings bonds for as little as $25.

How can I buy a Treasury bill, note, bond, or TIPS?

You can buy Treasury bills, notes, bonds, or TIPS at one of the auctions we conduct, or in the securities market. If you want to buy a Treasury security at an auction, contact the U.S. Treasury, a Federal Reserve Bank, a financial institution, or a government securities broker or dealer.

View upcoming auctions.

What is a Treasury auction?

Each Treasury bill, note, bond, or TIPS is sold at a Treasury auction. In these auctions, all successful bidders are awarded securities at the same price, which is the price equal to the highest rate or yield of the competitive bids we accept. You can find a complete explanation of the auction process in our Uniform Offering Circular, which is in the Code of Federal Regulations (CFR) at 31 CFR Part 356.

How can I find out when an auction will be held?

Usually a couple days before each auction, a press release is issued announcing the security being sold, the amount we're selling, the auction date, and other pertinent information. This information is available in the Tentative Auction Schedule and from your financial institution, broker, or dealer.

How can I participate in an auction?

Simply submit a bid for the security you want to buy. You can bid either noncompetitively or competitively, but not both in the same auction.

If you bid noncompetitively, you'll receive the full amount of the security you want at the return determined at that auction. Therefore, you don't have to specify the return you'd like to receive. You can't bid noncompetitively for more than $5 million in a single auction. Most individual investors bid noncompetitively.

If you bid competitively, on the other hand, you have to specify the return - the rate for bills or the yield for notes, bonds, and TIPS - that you would like to receive. If the return you specify is too high, you might not receive any securities, or just a portion of what you bid for. However, you can bid competitively for much larger amounts than you can noncompetitively.

How do I submit my bid?

A bid can be submitted for an auction directly to the Treasury, to a Federal Reserve Bank, or through a financial institution, broker, or dealer. We accept bids by mail or, for current customers, over the Internet and by touch-tone phone. Although we don't charge fees to process a bid, some financial institutions, brokers, and dealers may charge for that service.

What is the minimum purchase amount for Treasury securities?

The minimum amount that you can purchase of any given Treasury bill, note, bond, or TIPS is $100. Additional amounts must be in multiples of $100.

Do I have a choice as to where my Treasury securities are kept?

All Treasury securities are issued in what we call "book-entry" form - an entry in a central electronic ledger. You can hold your Treasury securities in one of three systems: TreasuryDirect, Legacy Treasury Direct, or the Commercial Book-Entry System. TreasuryDirect and Legacy Treasury Direct are direct holding systems where you have a direct relationship with us. You can purchase all securities except Cash Management Bills in TreasuryDirect or through government securities brokers and dealers. You can purchase 13- and 26-week bills in Legacy Treasury Direct. Cash Management Bills may be purchased through government securities brokers and dealers only. (NOTE: Legacy Treasury Direct is being phased out.)

The Commercial Book-Entry System is an indirect holding system where you hold your securities with your financial institution, government securities broker, or dealer. The Commercial Book-Entry System is a multilevel arrangement that involves the Treasury, the Federal Reserve System (acting as Treasury's agent), banks, brokers, dealers, and other financial institutions. So, in the Commercial Book-Entry System, there can be one or more entities between you and the Treasury.

What features does TreasuryDirect offer?

TreasuryDirect provides a web-based environment for buying and holding Treasury bills, notes, bonds, and TIPS, as well as savings bonds. You cannot purchase Cash Management bills in TreasuryDirect. The TreasuryDirect website can be used to open an account, conduct most transactions, and access account information. Online services are available 24 hours a day, seven days a week. You designate the financial account or accounts into which we make payments and from which we make withdrawals. We don't charge any fees when you open an account or buy securities. TreasuryDirect permits accounts for both individuals and various types of entities including trusts, estates, corporations, partnerships, etc. See Learn More about Entity Accounts for full information on the new registration types.

What features does *Legacy Treasury Direct offer?

*Legacy Treasury Direct allows you to conduct transactions online, over the phone, and by mail. In this program, you can buy and hold 13- and 26-week bills. You designate the financial account into which we make payments and from which we make withdrawals. We send account statements to you by mail. We don't charge any fees when you open an account or buy securities. However, if your account holds more than $100,000, you will be charged an annual maintenance fee of $100. Reinvestments are available for 13- and 26-week Treasury bills, and for maturing 52-week bills being reinvested into 13- and 26-week bills.

What features does the Commercial Book-Entry System offer?

In the Commercial Book-Entry System, you'll maintain your relationship with your financial institution, broker, or dealer and potentially pay fees for their services. The Commercial Book-Entry System allows you to easily buy and sell securities as well as use them for collateral. You can also hold Treasury securities in stripped form, known as STRIPS or zero-coupon securities, in the Commercial Book-Entry System.

What are STRIPS or zero-coupon securities?

STRIPS, also known as zero-coupon securities, are Treasury securities that don't make periodic interest payments. Market participants create STRIPS by separating the interest and principal parts of a Treasury note, bond, or TIPS. For example, a 10-year Treasury note consists of 20 interest payments - one every six months for 10 years - and a principal payment payable at maturity. When this security is "stripped," each of the 20 interest payments and the principal payment become separate securities and can be held and transferred separately. STRIPS can only be bought and sold through a financial institution, broker, or dealer and held in the Commercial Book-Entry System.

How can I sell my Treasury security before maturity?

If you hold your security in the Commercial Book-Entry System, contact your financial institution, government securities dealer, broker, or investment advisor. Normally there is a fee for this service. If you hold your security in TreasuryDirect or *Legacy Treasury Direct, you can transfer it to an account in the Commercial Book-Entry System.

How do I receive my interest and principal payments in each system?

In TreasuryDirect and *Legacy Treasury Direct, the U.S. Treasury makes interest and principal payments directly to the financial account you choose. In the Commercial Book-Entry System, Treasury's interest and principal payments may flow through several institutions on their way to you. For example, a payment could go from the Federal Reserve to a large bank to a smaller bank to your bank or broker before it gets to you.

What happens when my security matures?

When your security matures, we pay you the principal and the final interest payment through TreasuryDirect, *Legacy Treasury Direct, or the Commercial Book-Entry System. Rather than take payment of the principal, customers of TreasuryDirect can choose to roll the principal into another security. For customers of Legacy Treasury Direct, reinvestments are available for 13-week and 26-week Treasury bills, and for maturing 52-week bills being reinvested into 13-week and 26-week bills.  In TreasuryDirect you do this by scheduling a repeat purchase. In Legacy Treasury Direct, you do it by scheduling a reinvestment. Legacy Treasury Direct allows you to reinvest by mail, phone, or over the Internet.

How can I get more information about Treasury securities?

For more information about Treasury securities, visit Treasury Marketable Securities.