U.S. Treasury bonds and notes pay a fixed rate of interest semiannually. The reliability of consistent interest payments makes these securities an attractive investment option for those who want regular income from their investments, such as those in or near retirement.

Treasury securities are backed by the full faith and credit of the U.S. government, making the risk of default minimal. For this reason, Treasuries are considered relatively safe investments.

The interest on U.S. bills, notes and bonds is federally taxable, but is exempt from state and local taxes.

We know you can buy Treasuries at any bank, but at Edward Jones you won't just be sent on your merry way with a deposit receipt and a bond certificate. We'll work with you to see how and when U.S. Treasury bonds, notes and bills make sense as you progress toward your financial goals.

Treasuries are highly liquid compared to other types of bonds, making them relatively easy investments to enter or exit. The deeper, more liquid market could potentially lead to lower transaction costs and greater price transparency for Treasury investors.

As with all fixed-income investments, U.S. Treasury securities carry interest rate risk. Bond prices generally fall when interest rates rise and vice versa. The longer a bond’s maturity, the more sensitive its price to changes in interest rates. Therefore, Treasury bonds and notes carry more interest rate risk than T-bills. However, the greater interest rate risk associated with Treasury bonds and notes is usually accompanied by higher yields.

As a lower-risk investment, U.S. Treasuries have historically offered lower returns than higher-risk investments like high-yield bonds and stocks. In this case, opportunity cost refers to the risk that other investments will outperform Treasuries. We recommend investors diversify across a variety of asset classes, investment styles and sectors based on their financial goals. We believe a portfolio spread across different asset classes can help reduce drastic swings in the value of your portfolio, putting you in a better position to achieve your long-term goals.

Treasury bonds, bills and notes pay a fixed rate of interest and have a fixed par value, regardless the level of inflation. As a result, there is risk that the fixed interest payments might not keep up with the rate of inflation. In addition to bonds, bills and notes, the U.S. Treasury Department also issues Treasury Inflation Protected Securities (TIPS), which can help protect investors from inflation. As inflation rises, the par value of TIPS rises with it. While the interest rate is fixed at the time of issuance, the interest payments will increase if the par value is adjusted higher, since the payments would be based on a higher par value. When TIPS mature, the investor will receive the greater of the inflation-adjusted principal or the original principal.

Treasury bonds are considered low-risk investments, but they are not risk-free. Their main risks include interest rate risk, inflation risk and opportunity cost. For example, if interest rates rise, the market value of an existing Treasury bond may fall, especially for longer-term bonds. That’s why Edward Jones generally recommends building a well-diversified portfolio based on your financial goals rather than relying on one type of investment.

A $10,000 Treasury bill, or T-bill, usually costs slightly less than $10,000 because Treasury bills are typically sold at a discount, though they can also be sold at face value. The exact cost depends on the auction rate or market price at the time of purchase. When the T-bill matures, you receive the full $10,000 face value, and the difference between your purchase price and the face value is your interest.

Neither is automatically better. A CD may be appropriate for investors who want a fixed rate over a shorter period and value FDIC insurance, when held at an FDIC-insured bank within applicable limits. A Treasury bond may be appropriate for investors seeking longer-term fixed income, semiannual interest payments and interest that is generally exempt from state and local income taxes. The right choice depends on your goals, time horizon, liquidity needs and overall portfolio strategy.