Bills are sold at a discount from their face values and make no interest payments during their lives. At maturity, you receive the face value, with the difference between the purchase price and face value representing the interest earned on the investment. Bills are appropriate for investors with a short-term investment horizon who want the security of a government guarantee. Treasury notes have maturities of one to 10 years, pay a fixed rate of semiannual interest over the life of the note and return the face amount of the note at maturity. Because of their longer maturities, notes have yields that are generally higher than those on bills.
Notes are suitable for investors with an intermediate to long-term investment horizon.
Treasury bonds are long-term government securities with maturities extending beyond 10 years. Bonds also pay a fixed rate of semiannual interest and return the face amount of the bond at maturity. Because bonds are long-term investments, their yields are generally higher than those of both bills and notes. Bonds offer dependable income to the investor with a long-term financial horizon. TIPS currently pay semiannual interest and return the adjusted principal value at maturity.