Types of Treasury Securities
I-Bonds (Series I Savings Bonds)
Inflation-protected bonds that adjust their rate every 6 months based on CPI inflation. Your purchasing power is preserved regardless of inflation.
- Current composite rate: ~4.28% (fixed rate + inflation rate, adjusts May and November)
- Purchase limit: $10,000/person/year electronically + $5,000 in paper bonds via tax refund
- Minimum purchase: $25
- Lock-up: Must hold 12 months minimum. Forfeit 3 months interest if redeemed before 5 years.
- Tax advantage: Interest is exempt from state and local taxes. Federal tax deferred until redemption.
- Where to buy: TreasuryDirect.gov (only place to buy I-Bonds)
Treasury Bills (T-Bills) - Short Term
- Duration: 4 weeks to 52 weeks
- Current yields: 4.5-5.0% (as of 2026)
- Minimum: $100
- How they work: Buy at a discount, receive full face value at maturity. The difference is your interest.
- Where to buy: TreasuryDirect.gov, or through your brokerage (Fidelity, Schwab, Vanguard)
Treasury Notes (T-Notes) - Medium Term
- Duration: 2, 3, 5, 7, or 10 years
- Current yields: 4.0-4.5% depending on duration
- Interest: Paid every 6 months (coupon payments)
- Where to buy: TreasuryDirect or brokerage accounts
TIPS (Treasury Inflation-Protected Securities)
- Duration: 5, 10, or 30 years
- How they work: Principal adjusts with CPI inflation. Interest is paid on the adjusted principal. Guaranteed real return above inflation.
- Current real yield: ~2.0% above inflation
When Treasuries Make Sense
- Emergency fund alternative: T-Bills or I-Bonds can earn more than HYSAs while remaining essentially risk-free. The tradeoff is slightly less liquidity.
- Short-term savings (1-5 years): Money you'll need for a down payment, car, or wedding. Too risky for stocks, too long for 0.01% savings.
- Bond allocation in your portfolio: Financial advisors recommend bonds = your age in percentage (e.g., 30 years old = 30% bonds). Treasuries are the safest bond option.
- Preserving purchasing power: I-Bonds specifically protect against inflation. If inflation rises to 6%, your I-Bond rate rises to ~6% too.
When Treasuries Don't Make Sense
- Long-term growth (10+ year horizon): Stocks average 9.92%/year vs. 4-5% for bonds. Over 30 years that difference is massive ($454K vs. $185K on $200/mo).
- If you're young with high risk tolerance: A 25-year-old with 40 years until retirement should be mostly in stocks, not bonds.
How to Buy (Step by Step)
- For I-Bonds: Create account at TreasuryDirect.gov (takes 10 minutes, need SSN + bank account). Purchase I-Bonds in any amount from $25 to $10,000.
- For T-Bills/Notes through brokerage: Open a Fidelity, Schwab, or Vanguard account. Search for Treasury securities in their bond marketplace. No commission to buy.
- For Treasury bond ETFs: Buy SHY (1-3 year), IEF (7-10 year), or TLT (20+ year) in any brokerage account. Instant diversification and daily liquidity.
Tax Treatment
- Interest is exempt from state and local income taxes (significant if you live in a high-tax state like CA or NY)
- Federal income tax applies to interest earned
- I-Bond taxes can be deferred until you cash out (up to 30 years of tax-deferred growth)
Sources: TreasuryDirect.gov published rates, Federal Reserve data, US Treasury auction results 2026