Which is better, bonds or treasury bills?

Treasury bonds, or T-bonds, represent a form of long-term debt issued by governments to finance public spending. These bonds have a maturity period spanning either 20 or 30 years, making them the longest-dated among the Treasury securities family.

In contrast to Treasury bills (T-bills), which are short-term obligations, T-bonds are designed for investors seeking a stable investment over an extended period. This longer maturity horizon allows for greater potential returns, reflecting the time value of money and the assumption of higher risk.

Among the trio of Treasury securities—T-bills, T-bonds, and Treasury notes—T-bonds typically offer the highest yields. This is because investors demand compensation for locking up their funds for a longer duration, exposing themselves to market fluctuations and interest rate risk.

The issuance of T-bonds serves multiple purposes for governments. It enables them to raise capital for infrastructure projects, debt servicing, and other public expenditures. For investors, T-bonds provide a safe haven investment option, backed by the full faith and credit of the issuing government.

Despite their long maturity, T-bonds are highly liquid financial instruments, traded actively in the secondary market. This allows investors to buy and sell them with ease, making them attractive to a wide range of investors, including individuals, institutions, and foreign governments.