A guide to US Treasuries

Morgan Stanley Wealth Management


Summary: Treasuries may be a low-risk way to diversify portfolios and can potentially provide stability in times of uncertainty. Learn about the different types, benefits, and risks. 

Treasury securities, or Treasuries, are debt obligations issued by the United States government to raise cash needed to fund its operations and help finance the federal deficit. Since they are backed by the full faith and credit of the US government, Treasuries are regarded as one of the safest investments.

Treasuries have the potential to preserve capital, generate income, and add diversification to a portfolio.

Here’s a look at the different types of US Treasuries, their benefits, and how to invest.

Types of Treasuries

Treasuries are issued in six main structures, which are based on when securities mature and interest paid. Usually, the longer the maturity —referring to the amount of time it takes the US government to repay the principal, or initial investment, to the investor —the higher the interest rate, or coupon

  1. Treasury bills (T-bills): T-bills have the shortest maturities at four, eight, 13, 26, and 52 weeks. T-bills are typically issued at a discount to par (or face) value, with interest as well as principal paid at maturity. Interest earned is the difference between the par value and initial discount purchase price.
  2. Treasury notes (T-notes): T-notes are issued in terms of two, three, five, seven, and 10 years. They pay interest semi-annually and the principal at maturity.
  3. Treasury bonds (T-bonds): T-bonds have longer maturities that range from 20 to 30 years. Like T-notes, they pay interest semi-annually and principal at maturity.
  4. Treasury Inflation-Protected Securities (TIPS): TIPS have maturities of five, 10, and 30 years and pay interest semi-annually. These securities are pegged to the Consumer Price Index (CPI), meaning the principal value increases or decreases with inflation. While their interest rate is fixed, payments will fluctuate based on the adjusted principal value. At maturity, investors receive the adjusted principal or original principal, whichever is greater. 
  5. Floating Rate Notes (FRNs): FRNs are issued for a two-year term and interest is paid quarterly—although payments vary based on a reference rate tied to the 13-week T-bill. Principal is paid at maturity.
  6. Separate Trading of Registered Interest and Principal of Securities (STRIPS): Treasury STRIPS, also known as zero-coupon Treasuries, let investors hold and trade the interest and principal of certain T-notes and bonds as separate securities. They are not available directly from the government but can be bought and sold through a financial institution or brokerage firm. Payments are only made at maturity.


US Treasuries are considered the highest credit quality and most liquid fixed-income investments available because of their:

  • Safety: When you invest in Treasuries, you’re essentially lending money to the US government. The government then promises to pay you back on that specific maturity date.
  • Income stream: Treasury bonds and notes pay interest, which can provide an income stream to the investor.
  • Diversification: Treasuries have the potential to balance risk in a portfolio and have a low correlation to stocks, meaning that the price movements and returns of Treasuries tends to be independent from the price movements, or returns, of stocks.
  • Potential tax advantages: Some tax advantages may be available since they are only taxed at the federal level, not state or local levels.
  • Choice: Broadly, Treasuries may offer choices for virtually every investor regardless of time horizon thanks to their wide range of maturities.
  • Manage inflation: TIPS, specifically, may also help hedge the risk of rising inflation to maintain purchasing power.

Broadly, Treasuries may offer choices for virtually every investor regardless of time horizon thanks to their wide range of maturities.


As with other investment vehicles it’s important to consider how Treasuries may have other impacts on your investment portfolio. Treasuries also:

  • Could come with credit risk. Though Treasuries are backed by the full faith of the US government, there’s still a degree of risk associated with the possibility that the US government could default on its obligations. Though this risk has historically been low, it’s not entirely impossible.
  • Could be susceptible to interest rate fluctuations. Because interest rates move inversely with bond prices, there is a risk that the value of existing bonds will fall as interest rates rise. The longer the maturity, the more sensitive its market value is to changes in interest rates.

Treasury Auction Schedule

The US Treasury issues new bonds at regularly scheduled auctions. E*TRADE from Morgan Stanley customers can view the Treasury Auction Schedule and place orders or buy and sell Treasuries on the secondary market in the Bond Resource Center at any time.

Treasuries are also offered through exchange-traded funds (ETFs) and mutual funds, which invest in a collection of government-backed bonds.

When considering investing in US Treasuries, make sure that your decisions align with individual goals, timelines, and risk tolerance.

How can E*TRADE from Morgan Stanley help?

Government-backed bonds

Bolster your portfolio with funds that invest in US government-backed bonds—widely considered the safest, lowest-risk securities available.

Bonds and CDs

These investments pay regular interest and typically aim to return 100% of their face value at maturity. Choices include everything from U.S. Treasury, corporate, and municipal bonds to FDIC-insured certificates of deposit (CDs).

What to read next...

With solid yields and potential for price appreciation, US government bonds could offer a prudent hedge for some investors’ portfolios.

Investors may turn to money market mutual funds to generate potential earnings on cash needed in a short time frame. Ultra-short bond funds are another investing vehicle that may offer modestly higher yields—but also higher risk. Learn the difference between the two products.

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