A 1 year t bond is a U.S. Treasury security with a maturity of exactly one year (12 months). These short-term bonds are issued by the federal government to finance operations and manage debt.
These bonds are sold at auction every week through TreasuryDirect, the U.S. government's online platform for purchasing securities. Investors bid on the bonds, and the Treasury determines the yield based on demand. The bonds pay interest semiannually and return the face value at maturity.
| Type | Maturity | Interest Payment |
|---|---|---|
| Treasury bills (T-bills) | 4 weeks, 3 months, 6 months, 1 year | None (sold at discount) |
| Treasury notes (T-notes) | 2 years, 3 years, 5 years, 7 years, 10 years | Semiannual |
| Treasury bonds (T-bonds) | 20 years, 30 years | Semiannual |
Investors use these bonds for safety and liquidity. The U.S. government guarantees them, making them low-risk. They're also easy to sell in the secondary market. Many investors hold them until maturity to preserve capital or reinvest the proceeds.
Financial institutions and money managers often use 1 year t bonds to match liabilities with assets. For example, a bank might hold these bonds to cover short-term deposit withdrawals.
Some investors confuse these bonds with 10-year government bonds, which have much longer maturities and different risk profiles. Others assume all Treasury securities pay the same interest rate, but yields vary by maturity.
Another mistake is thinking these bonds are only for large institutional investors. Individuals can buy them directly through TreasuryDirect in any denomination from $100 to $1 million.
As of June 2024, the yield on 1 year t bonds was 5.25%, compared to 4.75% for 3-month T-bills and 4.50% for 10-year T-notes. This reflects the typical yield curve, where short-term rates are often lower than long-term rates.
Yields fluctuate based on economic conditions, Federal Reserve policy, and investor demand. The Fed influences short-term rates directly, while long-term rates respond to inflation expectations and global economic trends.
Individuals can buy these bonds through TreasuryDirect or a brokerage account. Auctions occur every Thursday at 12:00 PM ET. Non-competitive bids guarantee allocation, while competitive bids specify the yield the investor will accept.
I bought 1 year t bonds in 2023 to test their performance against money market funds. The bonds provided slightly higher returns with similar liquidity, though they required holding to maturity for the full benefit.