Treasury Bonds Guide 2026: T-Bills, TIPS, I Bonds & Yields Explained

Treasury Bonds: The Basics

US Treasury bonds are loans you make to the federal government. They're considered the safest investments in the world because the US government has never defaulted and can literally print money to pay you back.

That "risk-free" status makes Treasuries the foundation of the entire financial system. Every other bond is priced based on its spread over Treasuries. Understanding them isn't just useful—it's essential for any investor.

Why Treasuries Matter

Safety: Backed by full faith and credit of US government
Liquidity: The deepest, most liquid market in the world
Benchmark: All other rates are based on Treasury yields
Tax advantage: Exempt from state and local taxes
Diversification: Often move opposite to stocks during crises

Types of Treasury Securities

The Treasury issues several different securities. Here's the breakdown:

The Main Types

Type	Maturity	How It Pays	Best For
T-Bills	4 weeks to 1 year	Sold at discount, mature at par	Cash management, short-term savings
T-Notes	2 to 10 years	Semi-annual interest payments	Core bond allocation
T-Bonds	20 to 30 years	Semi-annual interest payments	Long-term income, pension matching
TIPS	5, 10, or 30 years	Principal adjusts with inflation	Inflation protection
I Bonds	Up to 30 years	Fixed rate + inflation rate	Tax-deferred inflation hedge

Quick Definitions

T-Bills: Short-term. You buy them at $98, get back $100 at maturity. The $2 is your interest.
T-Notes: Medium-term. Pay interest every six months. Most common Treasury security.
T-Bonds: Long-term. Same as notes but 20-30 year maturities. More interest rate risk.
TIPS: Inflation-protected. The principal goes up with CPI, so your purchasing power is maintained.
I Bonds: Retail savings bonds. Can only buy $10K/year directly. Great inflation hedge.

How to Buy Treasury Bonds

There are several ways to get Treasury exposure:

Option 1: TreasuryDirect (Direct Purchase)

The government's website lets you buy Treasuries directly with no fees.

Pros: No fees, no middleman, access to I Bonds
Cons: Clunky website, can't sell easily, no secondary market access
Best for: I Bonds, buy-and-hold T-bills

Option 2: Brokerage Account

Fidelity, Schwab, Vanguard, etc. all let you buy Treasuries.

Pros: Easy to buy/sell, can trade secondary market, integrated with your portfolio
Cons: Small markup possible, can't buy I Bonds
Best for: T-bills, T-notes, T-bonds, TIPS

Option 3: ETFs

Treasury ETFs hold baskets of government bonds.

ETF	Ticker	What It Holds	Expense Ratio
iShares 1-3 Year Treasury	SHY	Short-term Treasuries	0.15%
iShares 7-10 Year Treasury	IEF	Intermediate Treasuries	0.15%
iShares 20+ Year Treasury	TLT	Long-term Treasuries	0.15%
Schwab Short-Term US Treasury	SCHO	1-3 year Treasuries	0.03%
iShares TIPS Bond	TIP	Inflation-protected	0.19%

Understanding Yields

Bond yields confuse people. Let me make it simple.

Yield vs Price

When you hear "the 10-year yield is 4.5%," that's the annual return you'd get if you bought a 10-year Treasury today at the current price. Here's the key insight:

When yields go UP: Bond prices go DOWN
When yields go DOWN: Bond prices go UP

They move in opposite directions. Always.

Current Yields (January 2026)

Maturity	Approximate Yield
3-Month T-Bill	~4.2%
1-Year T-Bill	~4.0%
2-Year T-Note	~3.8%
10-Year T-Note	~4.3%
30-Year T-Bond	~4.5%

The Yield Curve

Normally, longer maturities pay more (upward sloping curve). When short rates are higher than long rates, it's called an "inverted" curve—often a recession signal.

Interest Rate Risk Explained

This is crucial to understand. The longer the maturity, the more the bond's price moves when rates change.

Duration and Price Sensitivity

Bond Type	Approx Duration	Price Change if Rates Rise 1%
T-Bills (6 month)	0.5 years	-0.5%
2-Year Note	2 years	-2%
10-Year Note	8 years	-8%
30-Year Bond	18 years	-18%

See the pattern? A 30-year bond drops 18% if rates rise 1%. That's not "safe" in the short term! TLT (the 20+ year Treasury ETF) dropped 40%+ during 2022's rate hike cycle.

Here's my rule: if you need the money within 5 years, stick to short-term Treasuries. Long bonds are only "safe" if you can hold to maturity or have a long time horizon.

I Bonds: The Inflation Fighter

I Bonds deserve special attention because they're genuinely unique.

How I Bonds Work

Two parts: Fixed rate (set when you buy, never changes) + Inflation rate (adjusts every 6 months with CPI)
Purchase limits: $10,000/year per person electronically, plus $5,000 with tax refund
Lock-up: Can't redeem for 1 year. Lose 3 months' interest if redeemed before 5 years.
Taxes: Federal tax only, deferred until you cash out

Current I Bond Rate (January 2026)

Component	Rate
Fixed Rate	1.30%
Inflation Rate	1.47% (changes May/November)
Composite Rate	~4.28%

When I Bonds Make Sense

Part of your emergency fund (after the 1-year lock-up)
Worried about inflation over the long term
Want tax deferral and state tax exemption
Have maxed out other tax-advantaged accounts

Portfolio Allocation

How much of your portfolio should be in Treasuries? It depends on your situation.

Allocation Framework

Investor Profile	Suggested Treasury/Bond %	Duration
Young, aggressive	0-20%	Short to intermediate
Middle-aged, balanced	30-40%	Mix of short and intermediate
Near retirement	40-60%	Intermediate, some TIPS
In retirement	50-70%	Ladder or matched to spending needs

Building a Treasury Ladder

A ladder spreads your purchases across different maturities. As each one matures, you reinvest at the back of the ladder.

Example 5-year ladder with $50,000:

$10,000 in 1-year T-bill
$10,000 in 2-year T-note
$10,000 in 3-year T-note
$10,000 in 4-year T-note
$10,000 in 5-year T-note

When the 1-year matures, buy a new 5-year. You always have something maturing soon while capturing higher long-term rates.

Practical Tips

Some things I've learned about Treasury investing:

Do This

Max your I Bonds: $10K/year at TreasuryDirect. Best deal for retail investors.
Match duration to need: If you need money in 2 years, don't buy 10-year notes.
Consider direct purchase: For T-bills you'll hold to maturity, TreasuryDirect is fine and free.
Use ETFs for flexibility: If you might need to sell before maturity, ETFs are easier.
Remember state taxes: Treasuries are exempt from state tax. That's valuable in high-tax states.

Avoid This

Buying long bonds for "safety": They're volatile! TLT can drop 20% in a bad year.
Ignoring opportunity cost: In bull markets, heavy Treasury allocation means missed gains.
Paying high fees: Treasury ETF expense ratios should be under 0.20%. Some brokers charge for individual bond purchases.
Forgetting about inflation: 4% yield sounds good until inflation is 3.5%.

Current Environment Take

With yields around 4%+ across the curve, Treasuries are more attractive than they've been in 15+ years. That doesn't mean load up—but it does mean bonds deserve a place in most portfolios again.

My suggestion for most investors:

Max I Bonds ($10K/year)
Keep emergency fund in short-term Treasuries or money market
Use intermediate Treasury ETF (like IEF or VGIT) for core bond allocation
Avoid long bonds unless you have a specific reason to own them

Boring? Yes. Effective? Also yes.

This is not investment advice. Bond prices can decline if interest rates rise. Do your own research before investing.