Buying Treasury bills - great choice for cash reserves

[srblanco7]

I've been buying T-bills of varying duration (typically 2-6 months) at auction via Vanguard website. It's very straightforward.

Last time I was on the site I noted they also have t-bonds and t-notes. My understanding is that t-bills are typically less than a year in duration, t-notes are up to 10 years, t-bills are up to 30 years. When I buy a t-bill (say for $5k) the initial investment is a reduced amount (say $4.75k) that then grows to $5k over the t-bill duration. I'm assuming that for t-notes and t-bonds, you pay in the full amount, and, as I understand it, receive biennial interest payments and then return of capital upon maturity. Is this correct?

[disneysteve]

I'm assuming that for t-notes and t-bonds, you pay in the full amount, and, as I understand it, receive biennial interest payments and then return of capital upon maturity. Is this correct?

I wasn't sure so I just looked at a 10-year Treasury note at Vanguard. The purchase price was less than face value, but keep in mind this is buying on the secondary market. I'm not sure how it works if buying new issues as I've never done that.

[srblanco7]

I wasn't sure so I just looked at a 10-year Treasury note at Vanguard. The purchase price was less than face value, but keep in mind this is buying on the secondary market. I'm not sure how it works if buying new issues as I've never done that.

I found an article on the Fidelity website that seems to confirm my understanding. On the secondary market, my understanding is that the price should vary in proportion to the interest being paid by the secondary bond vs. a new issue bond. That is, if the secondary bond is paying 4% and a new issue bond is paying 5%, you should be buying at a 20% discount.