Type

• The main types of US government bonds include bills, notes, bonds and savings bonds. Treasury bills, or T-bills, sell for less than their face value, and reach full face value at maturity. Notes, or T-notes, earn interest every six months until maturity, at a fixed rate. T-bonds pay interest on the same schedule as notes, but have longer maturity lengths. Savings bonds, including the E and EE series, generally start at face value and earn regular interest. I-bonds and TIPS, or Treasury Inflation-Protected Securities, earn a fixed rate of interest plus a rate that varies to keep up with inflation.
  
  

Time Frame

• T-bills come in maturity lengths of four, 13, 26 and 52 weeks. T-notes come in terms of two, five and 10 years, while T-bonds are generally long-term investments that last up to 30 years. T-bills, T-notes and T-bonds can be kept until maturity, or redeemed early. Savings bonds do not have a fixed maturity date, and continue to earn interest until they expire. However, savings bonds must be owned for at least five years to avoid forfeiting three month's interest. TIPS come in terms of five, 10 and 20 years.
  
  

Features

• The face value of a bill, note, bond or savings bond is same as its denomination, similar to the way a bill marked $10 has a face value of ten dollars. Although some financial institutions still sell paper government bonds, the US government only sells electronic versions. The face value of T-bills, T-notes and T-bonds depends on the auction price, and is always in increments of $100. Savings bonds come in denominations of $50, $75, $100, $200, $500, $1,000 and $5,000. Paper EE bonds are also available in a $10,000 denomination, since the purchase price for these paper bonds is half of their face value.
  
  

Benefits

• Government bonds are generally considered to be one the safest investments, since the government guarantees both the principle and the interest on the bonds. The interest on T-bills, T-notes, TIPS and T-bonds is exempt from Federal income tax, although it is still subject to state or local taxes. This makes them attractive to many investors and retirees who seek a guaranteed rate of return as well as tax benefits. Tax on the interest from savings bonds can often be deferred until the bond is redeemed. For this reason, savings bonds are popularly given as gifts, or used to save for future educational expenses.
  
  

Risk Factors

• The risk of a government defaulting on its bonds is extremely low, since to satisfy its debt obligations, the government can either print more money or raise taxes. However, either of these options can cause inflation, meaning that even if investors receive their principle and interest, the money is no longer worth what it was once was. To protect against inflation, some governments offer bonds that are guaranteed to at least keep up with inflation, such as TIPS and I-bonds.
  Some governments bonds are callable, meaning that the government can stop paying interest and refund the cost of the bond early, rather than waiting for maturity. This can leave investors without their expected interest income. Savings bonds have a penalty for early redemption, and may stop earning interest altogether after a period of years.