It’s been a whirlwind year for U.S. investors—again.
From unexpected tariff announcements and budget proposals ballooning the national deficit, to foreign investors pulling back from U.S. assets and a dollar that’s down 7.5% this year, the financial landscape has become a lot harder to navigate. Market swings feel sharper, the economic headlines are louder, and the safe havens? Well, they’re starting to look a lot more appealing.
Amid all the noise, one quiet question keeps popping up: Should I be thinking more seriously about Treasury securities?
Specifically—Treasury bills vs bonds. Both are issued by the U.S. government. Both are considered among the safest investments in the world. And both offer something that feels increasingly rare: predictability. But beneath that surface of security lies a key difference—one that could affect how stable your income is, how long your money’s locked up, and what kind of risk you’re really taking on.
In a year where the Federal Reserve has hinted at more policy shifts, and long-term bond yields are reaching their highest levels since before the pandemic, investors are being forced to rethink their strategies. As Merrill’s own fixed-income strategists suggest, this may be a time to “pull the horns in a little bit”—to focus on income over speculation, and to take advantage of long-term yields while they’re still attractive.
So, where do Treasury bills and bonds fit into that mindset? That’s exactly what we’ll break down in this guide—starting with how each one works, and why choosing the right one could give your portfolio the calm it’s been missing.
Read More: Understanding Hybrid Financing Options: Convertible Bonds and Preferred Stocks
What Are Treasury Securities—and Why Should You Care?
At its most basic, a Treasury security is a way of lending your money to the U.S. government—with the promise that you’ll be paid back, plus interest. It might sound old-school compared to stocks or crypto, but when markets are shaky and headlines keep swinging, these government-backed IOUs offer something many of us crave: stability.
There are three main types:
- Treasury Bills (T-bills): Short-term investments that mature in a year or less. You don’t earn regular interest; instead, you buy them at a discount and get the full amount back later.
- Treasury Notes (T-notes): Medium-term securities, lasting from two to ten years. These pay interest every six months.
- Treasury Bonds (T-bonds): Long-term options that can stretch up to 30 years. Like notes, they pay interest twice a year and are usually favored by income-focused investors.
But these aren’t just dry textbook terms. Treasury securities—especially in 2025—sit at the heart of a much bigger story.
Right now, the global financial system is feeling a bit off-balance. A wave of policy surprises, including new tariffs and ballooning federal deficits, has made markets jittery. The dollar has dropped over 7% this year, and overseas investors are quietly shifting away from U.S. assets. In this kind of environment, people start asking different questions. Not just how do I grow my money, but how do I protect it from everything that’s swirling around it?
That’s why Treasuries still matter. These securities are considered so safe, so reliable, that they’re used to price almost everything else in the world of finance. They’re exempt from state and local taxes (which matters a lot if you live somewhere like New York or California), and while the federal government does take its cut, most people still see them as a smart way to preserve capital without taking on much risk.
And here’s the kicker: demand for Treasuries doesn’t just come from cautious retirees or financial planners. In the heart of the financial system, major institutions—banks, hedge funds, mutual funds—lean heavily on Treasury securities for their own safety nets. In fact, on any given day, around $900 billion worth of Treasuries changes hands. On high-stress days, that number can surge past $1.5 trillion. It’s that deep.
But even this fortress isn’t immune to pressure. In April 2025, after a surprise tariff announcement, Treasury yields shot up fast. Investors panicked. The normally liquid Treasury market became tense and sluggish, with rumors swirling that hedge funds were under pressure to sell off longer-term bonds. Prices seesawed. Auctions faltered. For a few days, some folks wondered: Are Treasuries still the gold standard they used to be?
Yet, just like in March 2020, the market found its footing again. Demand surged, auctions stabilized, and the 10- and 30-year Treasuries held firm—proving once more that while panic might shake things, faith in the U.S. government’s ability to repay its debts still runs deep.
So, why should you care?
Because understanding these securities isn’t just for Wall Street. Whether you’re 30 and building your first portfolio, or 60 and starting to think about income for retirement, Treasury securities offer a way to add clarity and calm to your financial plan—especially when everything else feels like it’s moving too fast.
Treasury Bills: The Short-Term Safety Net
When markets feel shaky, and your emergency fund isn’t enough, Treasury bills (T‑bills) can act like a financial lifeline. They’re designed for short-term capital preservation, offering a predictable return without locking your money away like longer-term bonds.
- How They Work: You buy a T‑bill at a slight discount—say $970 for a bill worth $1,000—and when it matures, the government pays you the full face value. That $30 difference is your gain. No quarterly interest checks. Just one simple payout when the clock runs out.
- Maturity Terms: T‑bills come in six flavors: 4, 8, 13, 17, 26, and 52 weeks. That flexibility lets you pick the term that aligns best with your needs, whether you’re saving for a vacation next month or want a year-long runway before a big purchase.
- Why It Matters in Volatile Times: Imagine the market just had a rough week, or a headline about deficits sent stocks tumbling. You don’t want your money dragged down. T‑bills are perfect here—they’re extremely low-risk, highly liquid, and interest earnings are state and local tax-free. It’s not about getting rich—it’s about staying secure until you’re ready to move.
Why Investors Are Reconsidering Long-Term Treasury Bonds in 2025
In the current uncertain economy, the long game isn’t feeling quite so steady. For months, investors have been eyeing long-term Treasury bonds with cautious optimism, but now that confidence is starting to wobble. Why? Because the Federal Reserve seems poised to hold interest rates steady—again. That wouldn’t normally rattle the bond world, but in 2025, things are different. The usual playbook isn’t working the way it used to.
Bond investors are beginning to retreat from longer-dated Treasuries—those 20- and 30-year commitments—because the dream of rapid interest rate cuts is slowly fading. The risk of a near-term U.S. recession looks slimmer than it did just months ago, which means the Fed is in no hurry to slash rates. That has people second-guessing whether locking into long maturities is still worth it right now.
But it’s not just economic data that’s raising eyebrows. Political uncertainty is adding more fuel to the fire. Concerns are growing around former President Trump’s proposed tax and spending bill, which is currently making the rounds in the U.S. Senate. If passed, it could potentially inflate the federal deficit, add pressure to bond yields, and shift inflation expectations—all major concerns for investors sitting on decades-long bonds.
In the past few weeks, soft readings on consumer and producer prices suggested inflation is holding steady, even in the face of higher tariffs. That gave some investors hope that the Fed might resume its rate-cutting cycle. Before those numbers came out, markets were betting on two cuts—one in September, and another in December. Now, even those projections are uncertain, with many guessing the Fed might wait until late this year or even early next to make a move.
Victoria Fernandez, a market strategist based in Houston, summed it up well: “I don’t necessarily want to go for a long duration.” In other words, she—and many others—don’t feel comfortable locking up capital for decades when the near-term outlook is still full of surprises. Duration, after all, is a measure of how sensitive a bond is to interest rate changes. The longer the duration, the bigger the price swing when rates move.
And those price swings have been painful. Thirty-year bond yields have been pushing toward 5%—a sign that sellers are under pressure and buyers are thinking twice. In April and May, auctions for 30-year bonds were met with little enthusiasm. It wasn’t until last week that demand perked up slightly, thanks to rising yields and a bit of calming in market volatility.
Even big names like J.P. Morgan are showing signs of pulling back. Their client surveys and bond fund data reveal a quiet trend: investors aren’t holding as many long-duration assets as they were just two months ago. It’s a shift grounded in realism, not fear. As one portfolio manager in Indianapolis put it, “If you expect volatility to persist, it’s difficult being long duration.”
So, what does all this mean for the everyday income-seeking investor? Long-term Treasury bonds are still backed by the full faith of the U.S. government. They’re not going anywhere. But in a market that’s waiting for clarity—from the Fed, from inflation, and from Washington—it might be smart to watch, wait, and weigh your options before going all in.
Comparing Treasury Bills vs Bonds: What Fits You Best?
When most people hear “Treasury securities,” their eyes glaze over. But if you’ve ever asked yourself, “Where can I put my money that feels safe, earns something, and won’t give me a headache?” — then it’s worth understanding the quiet power of Treasury bills and bonds.
So, let’s break it down like you’re chatting with someone who’s been there.
Timing: Short Sprint or Long Marathon?
- Treasury bills (T-bills) are like a short jog around the block. You buy them for a short period—sometimes just four weeks, max a year—and then you’re done. They’re perfect when you want to park your money somewhere safe and get it back soon, maybe with a little extra on top.
- Treasury bonds (T-bonds), though, are the long-distance runners. They stick around for 20 to 30 years. If you’re thinking about your retirement years or want to leave a legacy for your grandkids, these are the tools built for that job.
How You Get Paid: All-at-Once or Steady Streams?
With T-bills, you don’t get regular checks. You pay less now and get the full face value when they mature. Think of it like buying a $1,000 bill for $970 and then collecting the full $1,000 later. That $30? That’s your return.
T-bonds work differently. They hand you interest payments every six months—predictable, stable, and consistent. If you’re someone who appreciates a steady trickle of income (especially in retirement), it feels a lot like a quiet financial assistant dropping money into your account twice a year.
Liquidity and Volatility: Can You Get Out Easily?
Both can be sold before they’re due—but there’s nuance.
T-bills are easy to offload. Their short-term nature means they don’t get tossed around by interest rate shifts. You can treat them almost like cash with a suit and tie.
T-bonds? They’re more emotional. If interest rates go up, and you want to sell early, you might have to take a hit on the price. That’s why most people hang onto them for the full ride.
Risk: How Safe Is It Really?
Both are backed by the U.S. government, so in the world of investing, they’re about as close to a security blanket as you can get.
Still, T-bills are like the calm friend who never causes drama—super low risk. T-bonds are still safe, but the longer timeline makes them more sensitive to market moves. As long as you’re in it for the long term, though, the bumps tend to even out.
What About Treasury Notes, I Bonds, and Savings Bonds?
When you explore the Treasury world, you realize it’s more like a full family than just two cousins. Beyond T‑Bills and T‑Bonds, you’ve got T‑Notes (the steady middle child), I Bonds (the inflation fighter), and Series EE Bonds (the classic, straightforward saver). Each has its own personality—and its own right-fit situation.
T‑Notes (2–10 years): Your “Just-in-Between” Option
Think of T‑Notes as the Goldilocks of Treasuries—not too hot, not too cold. With maturities from two to ten years and interest paid to you every six months, they balance commitment and flexibility. You get better yields than a T‑Bill but without the long 20- or 30-year wait of a T‑Bond. They’re perfect for someone who wants certainty but isn’t ready to freeze their money for decades.
I Bonds: Your Inflation Shield
You’ve heard people worry that inflation is eating away at retirement—from grocery prices to rent hikes. I Bonds are built for that anxiety. They combine a fixed rate (right now around 1.10%) with an inflation rate that resets every six months based on CPI changes. Effective May–October 2025, that total comes to 3.98%—not bad compared to bank savings accounts under 1% and even some Treasury yields.
Here’s what makes I Bonds feel human:
- They grow in your pocket: Interest compounds semi-annually, so each check gets bigger.
- Real protection: Even if inflation worsens, your earnings adjust—and they won’t dip below zero.
- Bank or Treasury? You can’t sell them day-trading style. Instead, hold at least a year, or five to avoid a 3-month interest penalty. For many, that’s peace of mind with a touch of patience.
- 401(k) immune: They don’t belong in your 401(k) or IRA—only taxable accounts—but the 3.98% rate is compelling for that extra cash cushion .
If you want a low-risk place to protect purchasing power—especially for near-term goals like college or buying a home—experts see I Bonds as a valuable piece of the puzzle.
Series EE Savings Bonds: The Trusty Old Friend
If nostalgia had a financial instrument, it’d be Series EE Bonds. You can buy one for as little as $25, and they’re guaranteed to double in value if held for 20 years—even if interest rates are lousy. After that, they continue to earn interest for up to 30 years.
- Simple setup: You buy them at face value—no complex formulas.
- Safe and gentle: Ideal for small savers, gifting, or anyone who likes a low-stress way to grow money.
When Short-Term Beats Long-Term
Remember early 2025 when short-term interest rates were higher than long-term ones? That’s called an inverted yield curve—a rare signal where parking money short-term can sometimes beat locking it up long-term. In those moments, T‑Bills and even short-term T‑Notes can outperform traditional bonds, shifting the heartbeat of cautious savers.
How to Buy Treasury Bills and Bonds in the U.S.
If you’ve ever wondered how everyday folks like us can invest in U.S. government debt, the answer is surprisingly accessible—and it’s a lot friendlier than you might think. Let’s walk through the three main ways to buy Treasury securities: TreasuryDirect, brokerages, and bond funds—all with a straightforward, no-nonsense vibe.
1. TreasuryDirect.gov
TreasuryDirect is the U.S. Treasury’s own platform, and it’s built for investors who prefer going straight to the source. There are no middlemen and no extra fees—just you, your computer, and a government bond. You can set up an account online (you’ll need a Social Security number and a U.S. bank account), then make non-competitive bids in increments as low as $100.
That means you agree to accept the interest rate the auction decides, and bam—your order is filled, guaranteed. Just know that the interface feels a bit dated, and if you ever want to sell before maturity, you’ll have to transfer your bonds to a brokerage account and wait it out—sometimes up to 45 days or more.
2. Brokerages & Financial Advisors
Already using an investment platform like Fidelity, Schwab, or Vanguard? Then vaulting into Treasuries is simple. You get access to auctions and the secondary market, which means you can buy and sell more flexibly and even place competitive bids if you’re after very specific yields—though that’s usually for institutional investors.
On top of that, brokerages often provide portfolio tools, tax documents, and real-time pricing. Just be aware—minimum purchases may be higher (around $1,000), and fees or spreads may apply on the secondary market .
3. Bond ETFs & Mutual Funds
If you’d rather skip auctions altogether, Treasury bond ETFs or mutual funds offer a polished, hands-off route. Just like buying a stock, you purchase a share in a fund that owns a basket of Treasury securities. These funds are liquid—you can trade during market hours—and you get built-in diversification across various maturities. The big plus is convenience; the minor downside is an annual expense ratio (~0.1%), which slightly lowers your return .
4. Treasury Auctions
Treasury securities don’t just hang around waiting for buyers—they’re sold via auctions at scheduled times. Bills (short-term) are usually auctioned weekly, notes (medium-term) and bonds (long-term) every few months—typically in February, May, August, and November .
You can make a non-competitive bid (you get the full amount, but not the exact rate) or a competitive bid (you set your yield, but risk getting less or nothing). Bids are placed online, cut off around midday ET, and results come in after 5 PM—then your funds are withdrawn and securities deposited a short time later
When to Choose Treasury Bills vs. Bonds in Your Portfolio
Imagine you’re saving for a down payment, building an emergency fund, or planning for retirement. In this case, treasury securities can feel like trusted companions, but the key is choosing the right type depending on your journey. Let’s discuss how T‑bills and T‑bonds fit into real-world financial goals.
Short-Term Goals & Cash Parking: T‑Bills
With maturities ranging from just four weeks up to a year, t‑bills allow you to park your money safely without fearing price swings. They don’t pay interest in the traditional sense—you buy them at a small discount and redeem them at face value—but that discount becomes real, measurable gain. And since they’re backed by the U.S. government, your principal remains secure. With current yields around 4.3%, T‑bills outpace many bank products and offer superior liquidity and peace of mind.
Many smart investors use a T‑bill ladder—a series of t‑bills with staggered maturities—to ensure regular access to cash. As each rung matures, you can decide to reinvest or reallocate based on life’s needs. This is especially appealing in today’s shifting interest rate environment, letting you continuously capture new, higher-yielding opportunities.
Long-Term Plans & Retirement Income: T‑Bonds
If you’re building for retirement or another long-term goal, longer-term Treasury bonds—20 or 30-year maturity—might serve you better. These offer biannual interest payments, effectively functioning like a steady paycheck into retirement or to fund major future expenses.
However, be prepared for ups and downs. Though yields are currently appealing (up to around 4.9% on 30-year bonds), the value of long-term bonds can drop quickly if interest rates climb—a result of how bond prices and rates move oppositely—meaning selling early could result in capital loss. Most advisors suggest holding to maturity to avoid these price gyrations, ensuring you get the full principal back.
Diversification
Why choose one when you can have both? Including both T‑bills and T‑bonds in your portfolio can mix flexibility and steady income. T‑bills act like a buffer of cash, ready for short-term needs, while T‑bonds deliver reliable income and help anchor your portfolio during turbulent markets. Financial experts, including Morningstar’s Christine Benz, point out that a mix of cash, short-, and intermediate-maturity bonds can align holdings to spending timelines—one for now, one for a few years out, and longer bonds for future generations.
Bond Ladders: Smart Strategy for Everyone
If you’d like a more structured approach, consider a bond ladder—buying bonds or bills that mature at regular intervals, such as annually over a decade. When each rung matures, you’re in control—either cashing out, spending a bit, or reinvesting. This reduces reinvestment risk and ensures income flows steadily .
Advisors are increasingly building ladders right now due to the attractive yields across maturities. You lock in returns while keeping the flexibility to adapt to changing rate environments—no timing guesswork, just disciplined investing.
Are Treasury Securities a Good Investment in 2025?
If you glance at today’s Treasury landscape, it’s hard to ignore the juicy yields: short-term T-bills are earning around 4.3%, while longer-term staples like the 10-year and 30-year Treasuries are paying 4.4% — 4.9%. That’s more than many thought possible just a few years ago. The Federal Reserve is signaling two rate cuts this year, though the exact timeline remains murky. Add ongoing inflation, global trade flashpoints, and an election season brewing, and you’ve got a perfect storm of uncertainty that’s making these ultra-safe assets feel more compelling than before.
Financial advisors, CFPs, and bond strategists are digging in. Morningstar and others are raising the case that, over the next decade, Treasuries could outperform stocks—even with volatility around. Barron’s recently highlighted how T‑bill ETFs are outpacing money-market funds with steady, tax-friendly yields above 4%—proof that investors are seeking safety without sacrificing yield. On the flip side, bond king Jeffrey Gundlach warns that long-term Treasuries may not be “reliable flight-to-quality assets anymore,” especially with mounting U.S. deficits—he’s holding off until yields hit mid‑6% territory.
It’s easy to let headlines—like tariff-induced sell-offs or Moody’s credit downgrades—scare us. Reuters reported that April’s 20-year auction wasn’t fully embraced, reflecting jittery investor sentiment . But a successful 30-year auction shortly after showed confidence still exists. This tug-of-war reminds us: markets don’t always move logically—fear drives lots of decisions. Smart investors stick to fundamentals: yield, duration, and inflation outlook—not fleeting headlines.
FAQs
What are Treasury bonds?
Think of Treasury bonds as a long-term promise: you lend money to the U.S. government for 20 or 30 years, and in return, you receive steady, reliable interest payments twice a year. It’s a commitment—like planting a tree for your retirement shade. Backed by the “full faith and credit” of the U.S., T-bonds are considered one of the safest places to grow your money, especially if you’re aiming for steady income rather than risky highs.
How do Treasury bonds work?
Let’s say you buy a $1,000 T-bond with a 4% coupon. Every six months, you pocket $20. That continues for 20 or 30 years, and at the end, you get your $1,000 back in full. Sounds simple—but there’s another layer: bond prices fluctuate based on current interest rates. If rates go up, your bond becomes less attractive to buyers; if they drop, your bond’s value may rise. So, if you sell before maturity, you could gain—or lose—a bit.
How to buy Treasury bonds in the U.S.?
Start at TreasuryDirect for direct access with no fees. You can buy in small increments and take part in regular auctions held throughout the year. Prefer guidance or want more flexibility? Brokers let you shop around and trade bonds similar to stocks. If you’d rather not manage pieces yourself, a Treasury bond ETF might be a perfect fit—listen to your goals, and take the path that fits.
Are U.S. Treasury bonds taxable?
Short answer: yes and no. The interest you earn is taxable federally, so expect it in your federal return. But here’s the good part: no state or local tax on that income—great if you live in a high-tax area like California or New York. One word of caution: zero-coupon bonds and TIPS may generate “phantom income”—taxed before you actually receive any cash.
