What Are Treasury Securities And How to Buy? Investor Guide 2025

Investors always strive to create the most balanced account across different trading instruments to maximise returns and minimise risks. Many traders focus on high-earning securities like stocks, FX currencies, precious metals, and cryptos.

However, bonds are key instruments that highlight stability and longevity because of their association with governments or established corporations. Treasury securities are one of the most popular options to diversify your portfolio and multiply your fixed-income streams.

What are these treasuries, and how can you buy them? Let’s explore!

Treasury securities are government bonds issued by the US Treasury to create liquidity and fund federal operations and projects. Investors buy these assets to earn from periodic interest payments or discounted face values.

Typically, buyers earn Interest every six months until the contract expires. However, the rates and conditions may differ based on the security type.

US Treasuries are considered risk-free because they are backed by the government, making them suitable for earning steady income streams and hedging against inflation.

These security bonds come in different rates, types, and terms, offering diverse investment options for market participants. For example, TIPS bonds are adjusted for inflation to provide stable returns.

Yes. Treasury securities remain a vital investment option in 2025, particularly due to economic uncertainty, inflation risks, and changing Federal interest rates.

Their stable nature ensures capital preservation, making them suitable for risk-averse investors. Moreover, during higher market volatility, treasury inflation-protected securities become more in demand, offering protection against higher prices and lower purchasing power.

Investors buy these securities at face or a discount value, depending on their type. The face value is what the buyer pays to own the bond, which they will receive at the end of maturity, while a discount value can be lower than the maturity value, offering additional profits.

Treasury bills do not offer interest returns but are sold at a discount, while bonds and notes offer fixed interest payments. 

Bond types offer different earning opportunities and characteristics. For example, TIPS bonds adjust their principal value based on inflation, while Floating-Rate Notes have variable interest rates tied to them.

Treasury securities rates vary, but longer-term bonds generally offer higher yields due to their extended investment horizon. Short-term bonds, on the other hand, are less risky because they are returned quickly.

To better understand how treasuries work, let’s explain its main components.

Treasury securities have gained traction as stable investment options since the 1990s, particularly following economic fluctuations and Federal Reserve interventions. During the early 2000s, demand surged in response to financial crises and evolving monetary policies.

Following the 2008 financial crisis, investors explored low-risk assets, highlighting them as safe-haven investments. However, the introduction of TIPS bonds provided an inflation-protected option, appealing to those seeking to protect their purchasing power.

Today, the US treasury security market represents the vast majority of fixed-income investments, valued at $28 trillion in outstanding treasuries, with an average of $910 billion traded daily.

T-bills account for the highest share of these securities due to their short-term approach and quick turnover, despite not yielding periodic payments.

Technological advancements and online platforms, like TreasuryDirect, made it easier for market participants to buy without intermediaries.

In the last few years, inflation trends, Federal Reserve policies, and global economic uncertainties, such as the COVID-19 pandemic, have affected the valuation and demand for these securities. 

Subsequent economic recovery efforts and government intervention impacted yields and investor sentiment, making Floating-Rate Notes and inflation-protected bonds reliable instruments for hedging against unstable interest rates and prices.

The US Treasury offers several types of securities catering to different investment needs. These include bills, notes, and bonds, each with distinct maturity lengths and interest payments.

T-bills are short-term government securities with maturity periods between one month and one year. They do not offer periodic interest payments and are sold at a discount value (less than the face value returned to investors on maturity).

Treasury bills are ideal for those looking for low-risk, stable, and highly liquid short-term assets, especially during economic uncertainties. Their prices are determined during auction sales, reflecting market conditions and demand.

They are considered perfect cash-equivalent instruments that are readily available and backed by reliable issuers.

T-Notes are medium-term securities that mature between two and ten years. They pay holders fixed interest semiannually, making them suitable for investors seeking to earn at a balanced risk in the long run.

The 2-year and 10-year notes are the most demanded bond instruments, which are also used as indicators of economic trends and Fed policy expectations.

Their prices and yield rates vary based on demand and macroeconomic factors, including inflation, demand, and interest rates.

Treasury notes provide a balance between safety and return, making them vital components of diversified investment portfolios. They can be purchased through TreasuryDirect, banks, or brokerage firms.

T-bonds are long-term government securities with maturity periods between 20 and 30 years. They pay holders fixed, semiannual interest, making them ideal for investors seeking stable, long-term income.

Treasury bonds compensate for their extended periods by offering higher yields than T-Bills and T-Notes, attracting risk-taking investors. Their prices vary based on market demand and Federal Reserve interest rate policies.

They are commonly used for retirement planning, institutional investment portfolios, and risk-free capital preservation, which can be bought directly from the National Treasury or indirectly on the secondary market.

TIPS bonds are designed to protect holders against inflation by adjusting the principal value based on the Consumer Price Index (CPI). Their maturity periods range from 5-30 years, while 10-year bonds are more popular due to their balanced approach and benchmark indication.

Unlike traditional government bonds, Treasury inflation-protected securities ensure real returns by increasing the value when inflation rises.

Additionally, they pay fixed interests twice a year, calculated on the adjusted face value, making them a strong hedge against inflationary risks and economic uncertainties.

Due to their inflation adjustment feature, their yields are typically lower than traditional bonds, but they offer stability and preserve purchasing power over long investment horizons.

FRNs are Treasury securities with variable interest rates that reset every 13 weeks based on the latest auction results of 13-week T-Bills. Their flexibility and response to interest rate changes make them valuable assets to diversified bond portfolios.

Unlike fixed-rate securities, floating rate notes adjust their coupon payments based on short-term interest rate fluctuations, making them ideal during rising interest rates because they can provide higher yields than fixed-income bonds.

Typically, FRNs have a two-year maturity period and are traded on TreasuryDirect, brokerages, and secondary markets.

Treasury securities offer several advantages, including safety for being governmentally backed and diversification due to their distinguished profitability model. They have highly liquid markets and suit traders of all types. Here’s what you can expect.

Treasury securities are among the safest investments. They are backed by the full faith and credit of the United States government and carry almost no default risk, making them a vital option for investors seeking stable returns in the long run.

Treasuries help diversify trading portfolios by integrating various investment horizons and risk factors. Investors can combine them with riskier assets, like stocks or currencies, to hedge their positions.

During market downturns, treasuries often perform better than other securities, offering stability and moderate exposure when equities become more volatile.

Many prefer treasury bonds because they provide predictable returns, making it easier for traders to calculate their gains. With fixed interest payments on notes and bonds, investors can plan their cash flow efficiently and manage their income streams.

Even Treasury bills that do not pay interest offer clear returns based on their discounted purchase price compared to the face value at maturity.

TIPS bonds offer a safeguard against inflation and weak purchasing power by adjusting their principal based on changes in the Consumer Price Index.

This approach ensures that investors maintain profitability during inflationary periods and provides a reliable strategy to earn returns that outpace rising consumer prices.

Treasury markets are highly liquid, meaning traders can easily buy and sell in secondary markets without significant price fluctuations or prolonged processing times.

This liquidity feature makes treasury securities a preferred choice for those who prefer flexibility and want to access their capital quickly.

Treasuries have become more accessible with the spread of the Internet. After being limited to top-notch traders who had to physically go to investment firms and banks to buy such assets, almost any market participant can now navigate and purchase treasuries.

These low entry barriers increased the demand and prices, making trading them much easier. Here’s how to buy treasury securities.

You can find such securities at the United States Department of the Treasury through its online platform, TreasuryDirect. This is the safest, most straightforward, and most cost-effective approach to owning these assets, reducing intermediary costs.

You can create an account and purchase securities such as T-Bills, T-Notes, T-Bonds, and TIPS. TreasuryDirect allows reinvestment options and electronic transactions, making it convenient for investors looking for direct ownership.

However, it does not support secondary market activities. Therefore, buyers must hold their bonds/notes until maturity or transfer them to brokers for resale.

Brokerage firms and banks offer treasury securities in primary and secondary markets, allowing traders to purchase newly issued bonds and notes or trade their assets on different marketplaces.

However, these intermediaries charge transaction fees and other service charges to support selling securities before maturity, making them a solid choice for those who want immediate liquidity.

Investors can deploy different portfolio techniques, such as laddering strategies, where they accumulate investments across different maturities for balanced returns.

Therefore, purchasing through brokers may come with price markups on securities, so you should compare costs and benefits.

Treasury securities are sold through government auctions, classified as competitive and non-competitive biddings.

Auctions are conducted via TreasuryDirect and selected financial institutions. This method allows investors to acquire securities at rates determined by supply and demand without intermediary fees.

While auctions offer transparency and relatively lower costs, they require advance planning since securities are only available at scheduled intervals based on Treasury auction calendars.

With the broad range of treasury assets that you can find, some securities stand out as key investment choices due to their stability, returns, and inflation protection.

Treasury Inflation-Protected Securities (TIPS), the 2-year Treasury Note, and the 10-year Treasury Note are your best bets for a well-balanced portfolio, offering short-term liquidity and long-term income stability.

TIPS are essential for investors looking to protect their portfolios from inflation by adjusting their principal payments according to the Consumer Price Index.

During high inflation and economic instability, TIPS outperform traditional bonds, making them a crucial hedge against rising prices and offering semiannual interest payments.

The 2-year Treasury note is a key investment option if you are seeking short-term stability with higher yields than T-Bills and less volatility than long-term bonds.

These notes’ performance aligns with Federal Reserve interest rate decisions, making them essential indicators for economic trends and short-term investment planning.

The 10-year Treasury note is commonly used as a benchmark for interest rates and economic stability, and it also influences mortgage rates and loan pricing.

Investing in these assets provides a mixture of moderate yields and longevity, making them attractive for long-term investors.

While treasury securities are great instruments to secure stable returns in the short or long term, they come with some challenges.

Their low yields, compared to more volatile asset classes, may discourage some investors, especially during periods of stability. Let’s compare their pros and cons.

Treasury securities remain a critical component of a diversified investment portfolio in 2025. They offer valuable returns with minimal risk, whether you are seeking stability, hedging against inflation, or predictable income streams.

In recent times, treasury inflation-protected securities and floating-rate notes have gained popularity due to rising uncertainty, changing interest rates and increased volatility.

While some drawbacks are evident, treasuries are fully backed by the US government, making them reliable securities with little to no default risks.