Definition
Debt issued by the U.S. government, such as bills, notes, bonds and TIPS, backed by the full faith and credit of the United States.
What it means
The U.S. Department of the Treasury borrows by selling marketable securities. Treasury bills mature in one year or less and are sold at a discount to face value. Notes mature in 2 to 10 years and bonds in 20 or 30 years, and both pay interest every six months. Treasury Inflation-Protected Securities (TIPS) adjust their principal with inflation. Floating rate notes pay interest that changes with bill rates. You can buy them at auction through TreasuryDirect or through a bank or broker, where they can also be sold before maturity at market prices that may be higher or lower than what you paid. Interest is subject to federal income tax but exempt from state and local income tax. Savings bonds, such as I bonds, are separate non-marketable products.
Example
A 26-week Treasury bill with a $1,000 face value bought at auction for $980 pays $1,000 at maturity, so the $20 difference is the interest.
Illustrative numbers only. Your situation will differ.