Treasury Bills vs. Treasury Bonds vs. Treasury Notes

Investment Banker

Investors can invest in government-issued debt through three commonly known securities: treasury bonds, notes, and bills. These securities, known as ‘treasuries’ are issued by the Reserve Bank of India (RBI) and are traded in the money market.

When deciding which type of government-issued fixed-income security to invest in, it's essential to consider your investment goals and risk tolerance. Basics of stock, borrowing, & lending and proper knowledge of the financial markets are necessary before investing in these securities. Obtaining knowledge and getting certified from various online investment banking certification courses ease this process.

Treasury bills (T-bills) - They are money market instruments that are issued in ‘91 day’, ‘182 day’, and ‘364 day’ tenures. T-bills are zero-coupon securities, which means they do not pay any interest. However, they are purchased at a discounted rate and then redeemed at the original value (non-discounted value) after the bill matures. The return to the investors is the difference between the maturity value and the issue price.

T-bills are auctioned by the Reserve Bank of India (RBI) on behalf of the government. The RBI publishes a calendar for auctioning T-bills, which includes the precise date, the amount to be auctioned, and the maturity dates. T-bills are available for purchase in the primary market, where the government gets money by selling investors T-bills. To acquire T-bills, you must usually go through authorised brokers or banks who are authorised to participate in the T-bill auction process. For holding or owning T-bills, you need a trading account, a Demat account and a trading platform.

T-bills are a reliable and secure investment choice in India due to their high liquidity. They are also a popular short-term government scheme issued by the RBI and are backed by the central government. The features of T-bills include low investments, which cater to small and new investors who are looking to invest in T-bills.

Treasury Bonds (T-bonds) - Indian government-issued Treasury bonds are also available for investment in the money market. The India 10-Year Government Bond has a 7.315% yield, and the 10 Years vs 2 Years bond spread is 26.7 bp (basis points). The India 20-Year Government Bond has a yield of 7.416%. The bonds can be purchased through brokerage firms, banks, or bond dealers, and investors need to have a Demat account.

In the derivatives market, T-Bond futures and options are actively traded, allowing investors to hedge their positions or speculate on future movements in T-Bond prices. T-Bonds are popular among investors with significant resources such as banks, insurance firms, and pension funds searching for long-term investments with a fixed rate of return.

Treasury Notes (T-notes) - Treasury notes, often known as T-notes, are medium-term debt securities issued on behalf of the Indian government by the Reserve Bank of India (RBI). They have a 2-10 year maturity duration and pay a set interest rate semi-annually till maturity.

Because of the Indian government's good creditworthiness and low default risk still makes T-notes a relatively secure investment. They are popular with investors seeking a guaranteed rate of return over a medium-term investment horizon.

Key Differences Between T-Bills, T-Notes, and T-Bonds

Treasury bonds offer the highest yields but have the highest risk due to their long-term maturity. Treasury bills are the safest but offer the lowest results. Treasury notes offer a middle ground in terms of both maturity and yield. A comparative study between these three government-issued securities is presented in the below table:

Features Treasury Bills Treasury Notes Treasury Bonds
Maturity 1 year or less 2 to 10 years More than 10 years
Interest Payment No interest paid until maturity Semi-annual interest payments Semi-annual interest payments
Interest Rate Lowest among the three Intermediate rate Highest among the three
Risk Lowest risk Moderate risk Moderate risk
Minimum Investment As low as Rs 25,000 Rs 10,000 Rs 10,000
Volatility Least volatile among the three Least volatile among the three Most volatile among the three
Yield Curve Used as a benchmark for short-term interest rates Used as a benchmark for medium-term interest rates Used as a benchmark for long-term interest rates
Derivatives Market T-Bill futures and options are actively traded T-Note futures and options are actively traded T-Bond futures and options are actively traded
Liquidity Highly liquid, traded actively in the money market Less liquid than T-Bills, traded in the money market Less liquid than T-Bills and T-Notes, traded in the debt market

The India 91 Day GOI Treasury Bill Bond Future Historical Data shows that the highest value was 98.36 and the lowest was 98.28 between February 24, 2023, and March 24, 2023. It is important to note that past performance is not indicative of future results, and investors should consider other factors such as interest rate risk and inflation risk when making investment decisions. 


Imarticus Learning offers a Certified Investment Banking Operations Professional (CIBOP) program that is designed for individuals who want to build a career in financial operations, including the Treasury and Clearing divisions in the financial markets. The program offers investment banking certification and the CISI (The Chartered Institute for Securities & Investment ) certified IOC (Investment Operations Certificate) upon completing the program.

These certifications are well-recognised and equip students for a worthwhile career within the money market and basics of stock, borrow & lending. Imarticus Learning has a placement team that helps students find jobs after completing the program. The program has a high placement rate, and students who complete the program have a head start in their careers as investment bankers.

The course covers all the topics related to investment banking such as handling complicated securities and derivative products, their trade-life cycles, and the functions associated with investment banking operations.

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