The Key Difference Between Treasury Bills and Treasury Bonds
Feature |
Treasury Bills (T-Bills) |
Treasury Bonds (T-Bonds) |
Definition |
Short-term government debt securities issued at a discount, maturing within one year. |
Long-term government debt securities with fixed interest paid periodically, maturity over 10 years. |
Maturity Period |
Typically 4, 13, 26, or 52 weeks (less than one year). |
Typically 10 to 30 years. |
Interest Payment |
No periodic interest; sold at discount and redeemed at face value. |
Fixed interest (coupon) paid semi-annually until maturity. |
Investment Purpose |
Used for short-term cash management and liquidity. |
Used for long-term investment and income generation. |
Risk Level |
Very low risk; backed by government credit. |
Very low risk; backed by government credit. |
Price Volatility |
Generally less volatile due to short maturity. |
More price sensitive to interest rate changes due to long maturity. |
Tax Treatment |
Interest income is exempt from state and local taxes in some countries. |
Interest income generally taxable at federal, state, and local levels. |
Liquidity |
Highly liquid and actively traded in money markets. |
Highly liquid but less so compared to T-Bills. |
Pricing |
Sold at discount; no coupon payments. |
Sold at or near face value; pays coupons. |
Treasury Bills vs Treasury Bonds
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