Treasury securities are the benchmark of the bond world. Their yields are a benchmark for many other rates, and they're what people mean when they say the "risk-free rate." This is Part 2 of our Bonds, Explained series: what the main types are, how each pays you, and how they're taxed.

The main types

The Treasury Department's auction schedule lists the lineup: bills, notes, bonds, inflation-protected securities (TIPS), and floating rate notes. Treasury's own debt management overview describes how they pay.

Table: U.S. Treasury securities at a glance
TypeMaturitiesHow it pays
Treasury bills4, 6, 8, 13, 17, 26, and 52 weeksSold at a discount to face value. No coupon: you earn the difference when it matures.
Treasury notes2, 3, 5, 7, and 10 yearsFixed coupon, paid every six months. Face value returned at maturity.
Treasury bonds20 and 30 yearsFixed coupon, paid every six months. Face value returned at maturity.
TIPS5, 10, and 30 yearsCoupon paid on a principal amount that adjusts with inflation. Covered in Part 5.
Floating rate notes2 yearsThe interest rate adjusts rather than staying fixed.

FINRA describes bills as non-interest-bearing, or zero coupon, securities, and notes as fixed principal securities that pay a coupon generally semiannually. Treasury securities are sold at competitive auction, per Treasury.

How a bill pays: a hypothetical 26-week bill
Buy at a discount$9,800
Receive face value at maturity (26 weeks later)$10,000
Earned over the period$200
Rate over 26 weeks: $200 ÷ $9,8002.04%
Hypothetical. Doubling to approximate a full year gives roughly 4.1%, which is how bill yields are typically compared with other rates.

How they're taxed

Treasury interest is subject to federal income tax but exempt from state and local income taxes, according to the IRS and Investor.gov. That exemption can make a Treasury's after-tax return better than a bank CD or corporate bond with the same stated yield, especially in high-tax states.

What they pay right now

On October 8, 2026, the Treasury's daily par yield curve showed the following. Longer maturities paid more, which is the typical pattern.

Table: Treasury par yields, October 8, 2026
MaturityYield
3-month bill4.23%
1-year4.44%
2-year note4.75%
5-year note4.99%
10-year note5.22%
30-year bond5.60%

These are market yields, not coupons. Part 3 explains the difference.

Backed by the government, but not immune to price swings

Treasuries carry the full faith and credit of the U.S. government, so default risk is considered minimal. They are still subject to interest rate risk. If you sell a 30-year bond before it matures after rates have risen, you can take a loss. Short-term bills have far less price sensitivity, because they mature so quickly.

For details on buying, Investor.gov points readers to TreasuryDirect.gov, the Treasury's direct-purchase site.

Common questions

What's the difference between a Treasury bill, note, and bond?

The main difference is maturity and how they pay. Bills mature in a year or less and are sold at a discount with no coupon. Notes mature in 2 to 10 years and bonds in 20 or 30 years, and both pay a fixed coupon every six months.

Are Treasury bonds risk-free?

They carry the full faith and credit of the U.S. government, so default risk is minimal. They are not free of interest rate risk: the market price of a Treasury can fall if rates rise, and the government does not guarantee that price.

Do I pay state tax on Treasury interest?

No. Treasury interest is exempt from state and local income taxes but is subject to federal income tax, according to the IRS.

This article is for informational purposes only and does not constitute investment advice. The bonds and prices in the examples are hypothetical and exist only to illustrate the concepts. Bond prices and yields change daily, and any bond can lose value if sold before maturity. Consult a licensed financial advisor before making investment decisions.
Sources
Bonds, Explained series
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