T-Bills (Treasury Bills)

Understanding U.S. Treasury Bills - short-term government debt securities

What are T-Bills?

Simple Definition

Treasury Bills (T-Bills) are short-term debt securities issued by the U.S. government. They are sold at a discount to their face value and mature in one year or less. T-Bills are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.

Key Characteristics

T-Bills have maturities of 4, 8, 13, 17, 26, or 52 weeks. They are sold at a discount (below face value) and pay no interest. Instead, you profit from the difference between the purchase price and the face value at maturity.

Why T-Bills Exist

The U.S. government issues T-Bills to finance short-term spending needs. They provide investors with a safe, liquid investment option while helping the government manage cash flow.

How T-Bills Work

Government Issues T-Bills

The U.S. Treasury auctions T-Bills regularly (weekly for some maturities). They are sold at a discount to face value through competitive and non-competitive bidding.

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You Purchase at Discount

You buy a T-Bill for less than its face value. For example, you might pay $980 for a $1,000 T-Bill that matures in 26 weeks.

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T-Bill Matures

When the T-Bill reaches its maturity date, the government pays you the full face value. Your profit is the difference between what you paid and the face value.

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You Receive Face Value

You receive the full face value at maturity. In the example above, you'd receive $1,000 for your $980 investment, earning $20 (about 4.08% annualized return).

T-Bill Maturity Periods

📅 4-Week T-Bills

Shortest maturity, auctioned weekly. Ideal for very short-term cash management.

Auctioned every week
Matures in 28 days
Highest liquidity
Lowest yield typically

📅 8-Week T-Bills

Two-month maturity, auctioned weekly. Good balance of liquidity and yield.

Auctioned every week
Matures in 56 days
Good liquidity
Slightly higher yield

📅 13-Week T-Bills

Three-month maturity, auctioned weekly. Most popular T-Bill maturity.

Auctioned every week
Matures in 91 days
Very liquid
Standard benchmark

📅 17-Week T-Bills

Four-month maturity, auctioned weekly. Slightly longer term option.

Auctioned every week
Matures in 119 days
Good liquidity
Higher yield than shorter terms

📅 26-Week T-Bills

Six-month maturity, auctioned weekly. Medium-term T-Bill option.

Auctioned every week
Matures in 182 days
Moderate liquidity
Higher yield

📅 52-Week T-Bills

One-year maturity, auctioned every 4 weeks. Longest T-Bill maturity.

Auctioned every 4 weeks
Matures in 364 days
Less liquid than shorter terms
Highest T-Bill yield

Pros and Cons of T-Bills

✅ T-Bill Advantages

Extremely safe: Backed by U.S. government
No default risk: Government always pays
Liquid: Can sell before maturity
Tax advantages: Exempt from state/local taxes
Low minimum: Can buy for as little as $100
No fees: Buy directly from Treasury
Predictable: Know exact return at purchase
Inflation protection: Can beat inflation when rates are high

❌ T-Bill Disadvantages

Low returns: Lower yield than stocks/bonds
Inflation risk: May not beat inflation
Interest rate risk: Value drops if rates rise
Opportunity cost: Money tied up
Taxable federally: Interest is taxable income
Reinvestment risk: Must find new investment at maturity
No compounding: Simple interest only
Market risk: Secondary market prices fluctuate

How to Buy T-Bills

🏛️ TreasuryDirect

Buy directly from the U.S. Treasury through TreasuryDirect.gov. No fees, no middleman. You can set up automatic reinvestment and manage your T-Bills online.

Free to use
Direct from government
Automatic reinvestment
Minimum $100

🏦 Through a Broker

Buy T-Bills through a broker or bank. More convenient but may have fees. You can buy both new issues and existing T-Bills on the secondary market.

More convenient
Access to secondary market
May have fees
Broker manages transactions

📊 T-Bill ETFs

Invest in T-Bill exchange-traded funds (ETFs) that hold T-Bills. Provides diversification and easy trading, but has management fees.

Easy to trade
Diversification
Management fees
Less control over maturity

💰 Money Market Funds

Invest in money market funds that hold T-Bills. Provides liquidity and professional management, but has fees and less direct control.

High liquidity
Professional management
Management fees
Not direct T-Bill ownership

T-Bills vs Other Investments

Feature

T-Bills

Savings Account

Stocks

Safety

Extremely safe

FDIC insured

Market risk

Return

Low to moderate

Very low

Potentially high

Liquidity

High (can sell)

Very high

High

Maturity

4-52 weeks

No maturity

Taxes

State/local exempt

Fully taxable

Capital gains tax

Minimum

$100

Often $0

Varies

Inflation Protection

Can beat inflation

Rarely beats inflation

Can beat inflation

Key Takeaways

🏛️ What T-Bills Are

T-Bills are short-term U.S. government debt securities with maturities of 4-52 weeks. They are sold at a discount and pay no interest - you profit from the difference at maturity.

💰 How They Work

You buy T-Bills for less than face value, hold until maturity, and receive the full face value. The difference is your return. They're extremely safe but offer lower returns than riskier investments.

🔒 Safety First

T-Bills are backed by the U.S. government, making them one of the safest investments available. They have virtually no default risk, but may not always beat inflation.

📊 When to Use T-Bills

T-Bills are ideal for short-term cash management, emergency funds, or when you want safety over high returns. They're great for preserving capital while earning some return.

💡 Tax Advantages

T-Bill interest is exempt from state and local taxes, making them attractive for investors in high-tax states. However, they're still subject to federal income tax.

⚖️ Trade-offs

T-Bills offer safety and liquidity but lower returns than stocks or longer-term bonds. They're perfect for short-term goals but may not be ideal for long-term wealth building.

🎮 T-BILLS ADVENTURE GAME

Navigate through T-Bill scenarios and make critical decisions! Learn about how T-Bills work, when to use them, their advantages and disadvantages, and how they compare to other investments.

MONEY:$1,000

Scenario 1 of 10

The Safe Investment Choice

You have $10,000 you need in 6 months for a down payment. You want it safe but earning something. A friend suggests T-Bills - government-backed, matures in 6 months, pays interest.

Should you invest in T-Bills for short-term safety?

Press Y for YES or N for NO