What is a treasury bill t-bill? (2024)

What is a treasury bill t-bill?

A Treasury bill (T-Bill) is a short-term U.S. government debt obligation backed by the Treasury Department with a maturity of one year or less. Treasury bills are usually sold in denominations of $1,000. However, some can reach a maximum denomination of $5 million in non-competitive bids.

Treasury bills — or T-bills — are short-term U.S. debt securities issued by the federal government that mature over a time period of four weeks to one year. Since the U.S. government backs T-bills, they're considered lower-risk investments.

Treasury bills, or bills, are typically issued at a discount from the par amount (also called face value). For example, if you buy a $1,000 bill at a price per $100 of $99.986111, then you would pay $999.86 ($1,000 x . 99986111 = $999.86111).

Treasury Bills (T-bills) 1.3 Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no interest.

Inflation. This is the rate at which the price of goods and services in the economy rises and is perhaps the greatest risk to T-bill investors. Rising inflation erodes the value of interest payments. Inflation can exceed the investment return and eat into the principal's value.

When the bill matures, you are paid its face value. You can hold a bill until it matures or sell it before it matures.

Currently, Treasuries maturing in less than a year yield about the same as a CD. Therefore, all things considered, it likely makes more sense to choose Treasuries over CDs, depending on your situation, because of the tax benefits and liquidity when considering very short-term maturities.

3 Month Treasury Bill Rate is at 5.21%, compared to 5.22% the previous market day and 4.58% last year. This is higher than the long term average of 4.19%. The 3 Month Treasury Bill Rate is the yield received for investing in a government issued treasury security that has a maturity of 3 months.

4 Week Treasury Bill Rate is at 5.27%, compared to 5.28% the previous market day and 4.49% last year. This is higher than the long term average of 1.37%. The 4 Week Treasury Bill Rate is the yield received for investing in a US government issued treasury bill that has a maturity of 4 weeks.

The minimum amount that you can purchase of any given Treasury Bill, Note, Bond, TIPS, or FRNs is $100.

Do you have to pay taxes on Treasury bills?

Key Takeaways

Interest from Treasury bills (T-bills) is subject to federal income taxes but not state or local taxes.

You can only buy T-bills in electronic form, either from a brokerage firm or directly from the government at TreasuryDirect.gov. (You can also buy Series I savings bonds through TreasuryDirect.gov.) The most common maturity dates are four weeks, eight weeks, 13 weeks, 26 weeks and 52 weeks.

The only interest paid will be when the bill matures. At that time, you are given the full face value. T-bills are zero-coupon bonds usually sold at a discount, and the difference between the purchase price and the par amount is your accrued interest.

The biggest downside of investing in T-bills is that you're going to get a lower rate of return compared to other investments, such as certificates of deposit, money market funds, corporate bonds or stocks. If you're looking to make some serious gains in your portfolio, T-bills aren't going to cut it.

There is virtually zero risk that you will lose principal by investing in T-bonds. There is a risk that you could have earned better money elsewhere.

Lax notes that both CDs and Treasury bills are considered safe harbor investments. But it's also important to have some money set aside for emergencies in a fully liquid savings account.

For individual investors, if your application for the T-bills was successful, the T-bills holding will be reflected in your respective accounts after the issuance date. For cash applications: You can check your CDP notification statement via CDP Internet after 6pm on issuance date.

You can hold Treasury bills until they mature or sell them before they mature.

Basic Info. 1 Year Treasury Rate is at 4.76%, compared to 4.83% the previous market day and 4.67% last year. This is higher than the long term average of 2.93%. The 1 Year Treasury Rate is the yield received for investing in a US government issued treasury security that has a maturity of 1 year.

When you buy T-bills through your bank, it may charge you additional fees and expenses such as sales commissions or transaction charges. These extra costs can add up over time and eat into your returns on your investment.

Why buy a CD over a Treasury?

CDs offer a fixed rate for locking up your money for a fixed period of time, but you'll only earn the highest returns if you choose longer terms. Treasury bills are shorter term and depending on the term you choose, you could lock your money up for as little as a few days or as long as one year.

If you're looking for a short-term investment with low risk, Treasury bills are a great choice. However, if you're looking for a longer-term investment that yields semiannual income with a consistent interest rate, buying Treasury bonds is likely the better choice.

They are sold at a discount to face value, and the difference between the discounted price and face value is your return on investment. For example, if you buy a 12-week T-bill with a face value of $10,000 for $9,800, the difference of $200 is your return for holding the security for 12 weeks.