The effects of asset liquidity on expected returns, shown by Amihud and Mendelson (1986, 1989) for assets with infinite maturities (stocks), are examined for bonds - Treasury notes and bills with matched maturities of less than 6 months. The yield to maturity is higher on notes, which have lower liquidity. The yield differential between notes and bills is a decreasing and convex function of the time to maturity. The results provide a robust confirmation of the liquidity effect in asset pricing.