See why the cause of a yield move matters for bonds, stocks, gold, the U.S. dollar and borrowing costs.
Treasury bills, notes and bonds are all marketable obligations of the U.S. Treasury, but they do not behave the same way. Maturity changes how long your money is exposed to interest-rate and inflation risk. Bills are short-term and usually sold at a discount; notes and bonds pay fixed coupons, and longer-maturity securities are generally more sensitive to yield changes.
Treasury bills vs notes vs bonds: The basic categories
TreasuryDirect currently describes bills as securities issued for one year or less, notes as two-to-ten-year securities, and bonds as long-term securities issued for more than ten years. Bills normally do not make coupon payments; investors typically buy them below face value and receive face value at maturity. Notes and bonds have fixed rates and make semiannual interest payments.
| Security | Broad maturity | Typical payment structure | Main maturity-related trade-off |
|---|---|---|---|
| Treasury bill | One year or less | Usually issued at a discount; no periodic coupon | Lower price sensitivity, but money must be reinvested sooner. |
| Treasury note | 2–10 years | Fixed coupon, generally paid semiannually | Middle ground between reinvestment frequency and duration risk. |
| Treasury bond | More than 10 years | Fixed coupon, generally paid semiannually | More exposure to long-run rate and inflation changes. |
Same issuer does not mean same price risk
The U.S. government stands behind each security's promised payments, but the market price before maturity can move. If market yields rise, an older fixed-rate note or bond with a lower coupon becomes less attractive unless its price falls. The SEC's Investor.gov materials emphasize that this interest-rate risk applies even to U.S. Treasury securities.
Longer maturities generally have greater interest-rate sensitivity because more of their cash flow arrives farther in the future. In bond mathematics, duration summarizes much of that timing sensitivity. Duration is not identical to maturity, but longer-maturity, low-coupon bonds usually have higher duration than short bills.
Worked example: Why duration changes the size of a price move
A common first-order approximation is percentage price change ≈ −duration × change in yield. Suppose a very short security has duration of about 0.8 years and a longer bond has duration of about 8 years. If market yields rise by 1 percentage point (0.01), the simple approximation gives:
| Illustrative security | Approx. duration | Yield move | Approx. price effect |
|---|---|---|---|
| Short security | 0.8 | +1 percentage point | About −0.8% |
| Longer bond | 8.0 | +1 percentage point | About −8.0% |
This is a teaching approximation, not a price quote. Actual changes depend on coupon, exact cash-flow timing, convexity and the shape of the yield curve. But it shows why “Treasuries are safe” does not mean “every Treasury has stable market value over every holding period.”
Price risk vs reinvestment risk
Short bills have limited duration, so their market price is less sensitive to long-rate moves. But they mature quickly. If rates fall, the proceeds may have to be reinvested at a lower yield. That is reinvestment risk. A long fixed-rate bond locks a coupon for much longer, reducing near-term reinvestment frequency but increasing the market-value impact if yields rise.
Neither risk is automatically better or worse. The relevant exposure depends on when the money is needed, whether the security will be held to maturity, and whether the goal is stable principal timing, current income or sensitivity to future rate changes.
Inflation risk is different from interest-rate risk
A nominal Treasury promises dollars, not purchasing power. If inflation is higher than expected, the real value of fixed nominal payments can be lower. TIPS address this differently by adjusting principal with CPI, but TIPS have their own market-price sensitivity to changes in real yields. A short bill, a long nominal bond and a long TIPS therefore represent different combinations of reinvestment, duration and inflation exposure.
Longer maturity usually means more interest-rate sensitivity, but maturity alone is not a complete duration measure. Coupon size, yield level, embedded features and cash-flow timing also matter. Compare like with like before assuming a specific percentage price move.
Why the yield curve matters
The yield curve compares yields across maturities. It can be upward sloping, flat or inverted. A higher long-term yield does not necessarily mean “more return for free”; it may compensate investors for inflation uncertainty, rate risk or term premium. A high short-term bill yield can also be temporary if markets expect policy rates to fall.
This is why comparing only the headline yield can be misleading. The maturity tells you how long the yield is locked, how quickly principal returns, and how much price can move before maturity.
Checklist: Before comparing Treasury yields
- What is the maturity? A 3-month bill and a 30-year bond solve very different timing problems.
- Is the quote a discount rate, investment rate, coupon or yield to maturity? Treasury instruments use different quoting conventions.
- Will you hold to maturity? Market-price volatility matters more if you may need to sell early.
- What is the duration? It is a better first approximation of rate sensitivity than the label “bond.”
- What is the inflation exposure? Nominal securities and TIPS protect different things.
- What happens when the security matures? Short maturities create more frequent reinvestment decisions.
Key takeaway
Bills, notes and bonds share an issuer but not a risk profile. Short maturities usually reduce interest-rate price sensitivity and increase reinvestment frequency. Long maturities do the opposite. The right comparison starts with maturity, duration and cash-flow timing—not the word “Treasury” alone.
Frequently asked questions
Are Treasury bills bonds?
In everyday speech people may use “bonds” broadly, but TreasuryDirect distinguishes bills, notes and bonds by maturity and payment structure. Bills are short-term discount securities, while notes and bonds pay coupons.
Can a U.S. Treasury lose value?
Its market price can fall before maturity when yields rise. Investor.gov specifically notes that government backing of promised payments does not guarantee the market price if a security is sold early.
Why can a short Treasury be less volatile than a long Treasury?
Its cash flow returns sooner, so a change in discount rates affects fewer distant payments. That normally means lower duration.
Does the highest yield always mean the best Treasury?
No. A higher yield can come with longer duration, different reinvestment timing or different inflation exposure. The appropriate maturity depends on the purpose of the money, not yield alone.
Sources and how this guide was prepared
This guide uses official Treasury maturity/payment descriptions and SEC investor-education material on price, maturity and interest-rate risk. The duration example is deliberately simplified and independently recalculable; it is not a recommendation to buy a maturity. Sources were reviewed on 22 October 2026.
- TreasuryDirect — Investing Directly with the U.S. Treasury — Explains current Treasury bill, note, bond, FRN and TIPS structures and broad maturity ranges.
- Investor.gov — Fixed Income Investments and Interest-Rate Risk — Explains the inverse price/yield relationship and why longer maturity generally means greater interest-rate risk.
- Investor.gov — Bonds, Selling Before Maturity — Explains why selling before maturity can produce a price above or below par.
- U.S. Treasury — Interest Rate Statistics — Primary source for Treasury yield-curve data across maturities.