🏦 Bonds & The Fed · Lesson 2 of 7 · 8 min
T-Bills, Notes & Bonds — What's the Difference?
⏱️ The US government will borrow your money for as little as 28 days or as long as 30 years. The longer you agree to wait, the more they pay you. In 2023, the 28-day version paid more than most savings accounts. Most banks did not send a memo about this.
💡 Key idea
Same government, same safety — just different time commitments.
🧠 Why it matters
T-BILLS = short (under 1 year). T-NOTES = medium (2-10 years). T-BONDS = long (20-30 years). All backed by the US government. Longer time = usually higher yield, but more risk if rates change.
🌍 In the real world
💰 In 2023, T-Bills offered 5%+ — higher than savings accounts. Millions of savers moved money out of banks INTO 4-week T-Bills. Wall Street declared 'TINA is dead' — TINA being 'There Is No Alternative' to stocks. Suddenly there was one.
📌 Takeaways
- T-Bills = under 1 year
- T-Notes = 2-10 years
- T-Bonds = 20-30 years
📖 Terms in this lesson
Coupon: The fixed interest a bond pays, named for the paper slips bondholders once clipped.
Treasury (T-bill, note, bond): Loans to the US government, the safest investment there is; bills are short, bonds are long.
✅ Test yourself
Which has the SHORTEST maturity?
- T-Bills
- T-Notes
- T-Bonds
- All same
Answer: A · T-Bills
T-Bills mature in under a year. T-Notes are 2-10 years. T-Bonds are 20-30 years. Time horizon is the main difference.
Who issues US Treasuries?
- JP Morgan
- The US Federal Government
- The Federal Reserve
- Foreign governments
Answer: B · The US Federal Government
The US Treasury Department issues T-Bills, T-Notes, and T-Bonds. The Federal Reserve is separate — it sets interest rate policy.
Why might someone buy a T-Bill over a savings account?
- T-Bills are free
- T-Bills often yield more, are tax-advantaged at state level, and equally safe
- T-Bills double your money
- Savings accounts are illegal
Answer: B · T-Bills often yield more, are tax-advantaged at state level, and equally safe
T-Bills are state-tax exempt (a real advantage if you live in CA, NY, etc.) AND often pay more than savings rates. Same safety as money in the bank.
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