A guide to US Treasuries

Morgan Stanley Wealth Management


Summary: Treasuries are a low-risk way to diversify portfolios and may 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.

Types of Treasuries

Treasuries are issued in six main structures. Usually, the longer the maturity, 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. They also offer some tax advantages since they are only taxed at the federal level, not state or local levels. Because of their wide range of maturities, they offer choices for virtually every investor regardless of time horizon.

Specifically, TIPS may help investors hedge the risk of rising inflation to maintain purchasing power.


Treasuries typically pay less interest than other fixed-income securities since the odds of the federal government defaulting are low. While this is favorable for credit risk, it means that the total return on investment may be less than a corporate or municipal bond. It also means that the income generated from Treasuries may not match the pace of inflation.

Additionally, Treasuries are susceptible to fluctuations in interest rates, and 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.

How to invest

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. 

Investors can also add exposure to Treasuries through exchange-traded funds (ETFs) and mutual funds, which invest in a collection of government-backed bonds.

As always, make sure that decisions align with individual goals, timelines, and risk tolerance before investing.  

How can E*TRADE help?

Need help getting started with bonds?

To get started with bonds, visit our comprehensive Bond Resource Center. Use our Advanced Screener to quickly find the right bonds for you. Or call our Fixed Income Specialists at (866-420-0007) if you need additional help.

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