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What You Need to Know About Treasuries

If you're looking for a relatively low-risk investment, you may want to look at U.S. Treasury bonds and U.S. savings bonds. Treasury bonds and savings bonds are debt securities issued by the U.S. Treasury Department to raise money to fund the federal government.

While the federal government backs both categories of bonds, there's no secondary market for U.S. savings bonds, meaning they can't be traded or sold between individuals. On the other hand, Treasury bonds can be bought and sold on the secondary market before they mature (i.e., reach the end of their term).


Understanding Treasury Securities

You might hear the term “Treasury Bond" applied to several different types of government-backed securities. All four types can be purchased through TreasuryDirect, banks and brokers. They're all sold in $100 increments, and you can purchase a maximum of $10 million. That cap applies for each security type and term and for each auction, meaning very few people have to worry about violating the purchase limits.1

Interest earned on any treasury security is taxable on your federal tax return but exempt from state and local taxes.


Treasury Bills (T-Bills)

T-Bills are short-term securities that mature in one year or less.2 You typically buy them at a discount and, upon maturity, receive the full face value. For T-Bills, the “interest" is the difference between what you paid and the face value you receive when the bill matures.


Treasury Notes (T-Notes)

T-Notes are medium-term securities, typically maturing in 2, 3, 5, 7, or 10 years.3 They pay a fixed interest rate every six months and return the face value upon maturity.


Treasury Bonds (T-Bonds)

T-Bonds are long-term securities with maturities of 20 or 30 years.4 They pay a fixed interest rate every six months and return the face value once the bond matures.

You can buy T-Bonds through TreasuryDirect, banks and brokers in increments of $100, up to a maximum of $10 million in a single auction.


Treasury Inflation-Protected Securities (TIPS)

TIPS are Treasury securities designed to protect against inflation. The principal increases or decreases along with changes in the Consumer Price Index (CPI). They mature in 5, 10, or 30 years and pay a fixed rate of interest twice a year.5

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You might hear the term “Treasury bond" applied to several different types of government-backed securities, including T-Bonds, T-Bills and T-Notes.

Changes to the principal during the year can also impact your federal income taxes. The semi-annual adjustments are treated as taxable income, even though you don't receive the money until you sell them or they reach maturity.6


Understanding U.S. Savings Bonds

Savings bonds can be a good way to save for long-term goals, such as education or retirement. Interest earned on any U.S. savings bonds is subject to federal tax (with some potential exceptions) but exempt from state and local taxes.


Series EE Bonds

Series EE bonds are savings bonds that pay a fixed rate of interest for up to 30 years.7 They are sold at face value — for example, a $50 bond costs $50. (Note that the old paper bonds, which were discontinued at the end of 2011, were sold at half of face value.)8 The interest on EE bonds is compounded monthly and paid when you cash the bond. The U.S. Treasury guarantees that an EE bond will double in value after 20 years, effectively setting a minimum interest rate.

Generally, you must pay federal income taxes on interest earned from EE bonds, although they're not subject to state income taxes.

EE bonds can be exempt from federal taxes if used for qualified educational expenses, under certain conditions. You can purchase up to $10,000 in EE Bonds each calendar year.


Series I Bonds

Series I bonds are a type of U.S. savings bond designed to protect against inflation. The interest on these bonds is a combination of a fixed rate that stays the same for the life of the bond and an inflation rate that is adjusted semi-annually.9 This dual interest rate ensures that the value of I bonds keeps pace with inflation, making them an attractive option for preserving purchasing power.

The Treasury discontinued the sale of paper bonds in 2011, with one exception: you can still buy paper Series I bonds with your tax refund by completing Form 8888 and attaching it to your tax return when you file.10

Similar to EE bonds, the interest earned on I bonds may be tax-exempt when used for higher education expenses. The annual purchase limit for I bonds is $10,000 in electronic form, plus an additional $5,000 in paper bonds using your federal income tax refund.


Series HH Bonds

Series HH bonds were savings bonds that paid semi-annual interest based on a fixed rate. Unlike EE and I Bonds, HH bonds were issued at face value and provided interest payments every six months until they mature in 20 years or you redeem them. It's important to note the sale of HH bonds was discontinued in 2004, but those still holding HH bonds continue to receive interest until maturity or redemption.11


Can You Buy Treasury Bonds or U.S. Savings Bonds for a Minor?

Yes, you can buy Treasury securities and U.S. Savings Bonds for a minor. However, you need to open a Minor account on TreasuryDirect.gov.12 A Minor account is a custodial account that is managed by a parent or guardian.


Can You Buy Treasury Securities in a Retirement Account?

You can hold Treasury securities, including T-Bills, T-Notes, T-Bonds and TIPS, in a retirement account, but it's not always as straightforward as buying other kinds of investments in these accounts.

Generally, the financial institution that holds your traditional or Roth IRA account will need to buy the treasury securities at auction or on the secondary market and make them available to account holders through funds owned by the financial institution.

Check with your financial advisor to find out how to purchase them and whether any fees are involved.

You can also purchase Treasury securities for a retirement account directly from TreasuryDirect if you have either:


  1. A Self-Directed IRA, which allows you to invest in alternative assets, or
  2. A Solo 401(k), a type of retirement account used by business owners with no employees.

These accounts have “checkbook control," allowing you to purchase Treasury securities under the account's name and tax identification number.

Important disclosure information

Asset allocation and diversifications do not ensure against loss. This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. Bradford Tax Institute, "TreasuryDirect Purchase Limits," accessed February 13, 2024. Back
  2. TreasuryDirect, “Treasury Bills," accessed January 12, 2024. Back
  3. TreasuryDirect, “Treasury Notes," accessed February 26, 2024. Back
  4. TreasuryDirect, “Treasury Bonds," accessed February 26, 2024. Back

  5. TreasuryDirect, “Treasury Inflation Protected Securities (TIPS)," accessed February 26, 2024.

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  6. CPA Practice Advisor, “The Tax Tips About TIPs: Treasury Inflation Protection Securities," published April 7, 2022, accessed February 26, 2024. Back
  7. TreasuryDirect, "EE Bonds," accessed February 13, 2024. Back
  8. John Egan, "How to Cash In Savings Bonds," Nasdaq, published June 2, 2022, accessed February 20, 2024. Back
  9. TreasuryDirect, "I Bonds," accessed February 13, 2024. Back
  10. TreasuryDirect, "Questions and Answers About Series I Savings Bonds," revised September 2022, accessed February 20, 2024. Back
  11. TreasuryDirect, "HH Bonds," accessed February 13, 2024. Back

  12. TreasuryDirect, “How Do I…?" accessed February 26, 2024.

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