Treasury securities are debt instruments issued by the US Department of the Treasury to finance the federal government. They are backed by the full faith and credit of the United States and are the largest and most heavily traded government bond market in the world. The family includes marketable securities, which can be bought and sold after issue, and non-marketable securities such as savings bonds, which can only be redeemed with the Treasury.
Treasuries play a central role across finance. Their yields are used as the US dollar risk-free rate, they are the main collateral in the repo market, and foreign central banks hold large amounts of them in their foreign exchange reserves because of the dollar's role as a reserve currency. This entry gives an overview; the main types have their own entries.
Treasury securities in plain terms
When the US government spends more than it collects in taxes, it borrows the difference by selling IOUs to the public, to banks and to foreign countries. Treasury securities are those IOUs. Some are repaid in a few weeks, others in 30 years, and some adjust their value with prices or with short-term rates.
Because the US government can raise taxes and borrows in the currency it issues, lenders treat these IOUs as about the safest place to keep dollars. That is why other rates, from mortgages to company loans, are usually quoted as a Treasury yield plus something extra.
Types of Treasury securities
The Treasury currently issues these marketable securities, according to TreasuryDirect:
- Bills. Short-term Treasury bills with terms from 4 weeks to 52 weeks; they pay no coupon and are sold at a discount to face value.
- Notes. Treasury notes of 2, 3, 5, 7 and 10 years, paying a fixed coupon rate every six months.
- Bonds. Treasury bonds of 20 and 30 years, also paying interest every six months; the 20-year bond was reintroduced in May 2020. The differences between short and long issues are compared in Treasury bills vs Treasury bonds.
- TIPS. Treasury Inflation-Protected Securities, first issued in 1997, in 5-, 10- and 30-year terms; their principal is adjusted by the Consumer Price Index, protecting holders against inflation.
- Floating rate notes (FRNs). Two-year notes, first issued in January 2014, that pay interest quarterly at a rate tied to the 13-week bill auction rate.
- STRIPS. Created in 1985, STRIPS let holders of eligible notes, bonds and TIPS split them into separate zero-coupon pieces for each interest payment and the principal; they are traded through banks and brokers only.
Non-marketable savings bonds, today Series EE and Series I, descend from wartime issues such as the Series E savings bond and the earlier Liberty Bond.
How Treasury securities are sold and traded
New marketable Treasuries are sold at regular auctions run by the Treasury with the Federal Reserve Bank of New York as fiscal agent. Bidders submit competitive bids stating a yield, or non-competitive bids that accept whatever yield the auction sets; individuals can bid through TreasuryDirect from $100. A group of large banks and dealers, the primary dealers, are expected to bid in every auction and make markets afterwards.
After issue, Treasuries trade over the counter around the clock in a market whose depth gives them high liquidity. Their yields across maturities form the benchmark yield curve, and an inverted yield curve has preceded most US recessions since the 1960s. The Federal Reserve buys and sells Treasuries to steer monetary conditions, and bought them in very large amounts during quantitative easing. In May 2024 the Treasury restarted a regular programme of buying back older, less-traded issues.
Taxation and investor use
Interest on Treasury securities is subject to federal income tax but exempt from state and local income taxes, which makes them attractive to investors in high-tax states. They are held by individuals, money market funds, pension funds, banks, insurers and foreign governments. Money market funds that invest almost entirely in Treasuries and repo backed by them are classed as government funds.
Treasuries carry essentially no credit risk in market practice, although the US lost its last AAA credit rating when Moody's moved to Aa1 in May 2025, and repeated debt-ceiling standoffs have raised the theoretical risk of a technical default. They do carry interest rate risk: long-dated Treasuries fell sharply in price when rates rose in 2022. The yield to maturity on Treasuries of each term is the benchmark against which corporate bonds are priced.