T-bills: park short-term cash (1-12 months) at competitive, state-tax-exempt yields with near-zero risk I-bonds: ideal first $10,000-$20,000 of inflation protection — simple, no phantom income, no duration risk TIPS: larger inflation hedges, particularly in retirement accounts where phantom income isn't a concern Nominal Treasuries: when you want to lock in a real yield and have a specific maturity target for a cash need All four work best in combination — a well-structured fixed income allocation often includes multiple maturities

T-bills beat most savings accounts and money market funds on an after-tax basis in high-tax states I-bonds are the simplest inflation hedge available to retail investors — start here before TIPS Hold TIPS in tax-advantaged accounts to avoid the annual phantom income tax problem TreasuryDirect.gov is free but clunky — many investors prefer buying Treasuries through Fidelity, Vanguard, or Schwab Short-term Treasuries reduce portfolio risk without sacrificing meaningful return relative to bank deposits

Treasuries, I-Bonds, and TIPS: The Government Bond Toolkit

Curated by: Rubric Advisors

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The Treasury Spectrum

Treasury bills (T-bills): maturities of 4 to 52 weeks, sold at a discount and redeemed at face value
Treasury notes: maturities of 2, 3, 5, 7, and 10 years, pay semiannual coupons
Treasury bonds: 20 and 30-year maturities, higher yields, significant duration and price risk
All Treasuries are exempt from state and local income taxes — a meaningful advantage for investors in high-tax states
You can buy Treasuries at auction with no fees through TreasuryDirect.gov or in the secondary market through any brokerage

T-Bills: The Emergency Fund Upgrade

4-week and 13-week T-bills consistently yield more than most savings accounts and are state-tax exempt
Rolling T-bills (auto-reinvesting at maturity) provides a near-liquid, high-yield cash equivalent
Treasury money market funds hold T-bills professionally and offer same-day liquidity — simpler than buying directly
T-bill yields are quoted as annualized discount rates; a 5% discount rate on a 13-week bill is approximately 5.06% annualized return
Ideal for Tier 2 emergency reserves or any money you'll need within 3-12 months

I-Bonds: The Inflation Hedge for Savers

Series I savings bonds earn a composite rate: a fixed rate (set at purchase) plus an inflation adjustment that resets every 6 months based on CPI
I-bonds cannot lose value in nominal terms — the floor is 0%, protecting against deflation
Purchase limit is $10,000 per person per year on TreasuryDirect.gov, plus up to $5,000 via a tax refund
Must be held at least 12 months; early redemption within 5 years forfeits the last 3 months of interest
Federal taxable, state/local exempt — you can defer tax until redemption, useful for managing income brackets

TIPS: Inflation Protection in Larger Quantities

TIPS principal adjusts with CPI — if inflation is 3%, your principal grows 3% and your coupon is paid on the larger amount
No purchase limits, available in 5, 10, and 30-year maturities through TreasuryDirect or any brokerage
The inflation adjustment is taxable each year as ordinary income even before you receive it — called 'phantom income'
Best held in tax-advantaged accounts (IRA, 401k) to avoid annual phantom income tax
TIPS mutual funds and ETFs (like VIPSX or SCHP) provide diversification without maturity concentration

When to Use Each

T-bills: park short-term cash (1-12 months) at competitive, state-tax-exempt yields with near-zero risk
I-bonds: ideal first $10,000-$20,000 of inflation protection — simple, no phantom income, no duration risk
TIPS: larger inflation hedges, particularly in retirement accounts where phantom income isn't a concern
Nominal Treasuries: when you want to lock in a real yield and have a specific maturity target for a cash need
All four work best in combination — a well-structured fixed income allocation often includes multiple maturities

Key Takeaways

T-bills beat most savings accounts and money market funds on an after-tax basis in high-tax states
I-bonds are the simplest inflation hedge available to retail investors — start here before TIPS
Hold TIPS in tax-advantaged accounts to avoid the annual phantom income tax problem
TreasuryDirect.gov is free but clunky — many investors prefer buying Treasuries through Fidelity, Vanguard, or Schwab
Short-term Treasuries reduce portfolio risk without sacrificing meaningful return relative to bank deposits

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The Treasury Spectrum

T-Bills: The Emergency Fund Upgrade

I-Bonds: The Inflation Hedge for Savers

TIPS: Inflation Protection in Larger Quantities

When to Use Each

Key Takeaways

Related Topics

Inflation and Portfolio Protection

Infrastructure Investing: Stable Cash Flows and Inflation Protection

Emergency Fund Strategies for High Earners

The Treasury Spectrum

T-Bills: The Emergency Fund Upgrade

I-Bonds: The Inflation Hedge for Savers

TIPS: Inflation Protection in Larger Quantities

When to Use Each

Key Takeaways

Related Topics

Inflation and Portfolio Protection

Infrastructure Investing: Stable Cash Flows and Inflation Protection

Emergency Fund Strategies for High Earners