You can buy U.S. Treasury bills in two ways: directly from the federal government through a TreasuryDirect account, or through a bank or brokerage account. The minimum purchase is $100, terms run from 4 to 52 weeks, and the bills are backed by the full faith and credit of the U.S. government.
Buying Through TreasuryDirect
TreasuryDirect is the government’s own online platform, and it cuts out any middleman. To open an individual account, you need a Social Security Number, a U.S. address, a checking or savings account at a domestic bank that accepts electronic debits and credits, and an email address.1TreasuryDirect. Open an Account — TreasuryDirect During registration you enter your bank’s routing number and account number so the Treasury can pull funds when you buy and deposit proceeds when a bill matures.
Get the Social Security Number or bank details wrong and your account can be placed on hold, which usually means resolving things with paper forms. Worth double-checking before you submit.
Once the account is open, log in and select the Buy Direct tab. Choose Treasury bills as the security type, pick the upcoming auction that matches the term you want, and enter the dollar amount.2TreasuryDirect. Buying a Treasury Marketable Security Choose a non-competitive or competitive bid, review, and confirm.
Your bid is a commitment to purchase at whatever rate the auction produces. Funds are debited on the bill’s issue date, not the day you place the bid, so leave enough in the linked account until then. After the auction settles, the bill sits electronically in your TreasuryDirect account until maturity.
Buying Through a Brokerage
You don’t have to use TreasuryDirect. Most major brokerages let you buy T-bills two ways: place a non-competitive bid in an upcoming Treasury auction, or buy an already-issued bill on the secondary market from another investor.
The auction path through a brokerage works much like TreasuryDirect. You pick a term, enter an amount, and submit a non-competitive bid; the brokerage handles the rest. The secondary market gives you more flexibility, because you can choose a bill maturing on almost any date instead of waiting for the next scheduled auction. Prices there move with current interest rates, so you may pay more or less than an auction buyer. Most large brokerages charge no commission on Treasury purchases, but confirm with your firm.
Choosing a Term
Treasury bills are issued in seven standard terms: 4, 6, 8, 13, 17, 26, and 52 weeks.3TreasuryDirect. Treasury Bills Shorter terms free up your cash sooner; longer terms generally pay slightly higher yields.
Each term has a regular auction day. The 4-week and 8-week bills are typically auctioned on Thursdays. The 13-week and 26-week bills are auctioned the following Monday. The 17-week bill goes on Wednesdays and the 52-week on Tuesdays.4TreasuryDirect. General Auction Timing Days can shift around holidays, so check the schedule before you bid.
Non-Competitive vs. Competitive Bidding
When you bid, you pick between two methods. Most individual investors use a non-competitive bid: you agree to accept whatever discount rate the auction produces, and in exchange you’re guaranteed to receive the full amount you asked for. The maximum non-competitive bid is $10 million per auction.5TreasuryDirect. History of Treasury Marketable Securities Auctions In Depth
A competitive bid lets you specify the exact discount rate or yield you’re willing to accept. If your rate is at or below the rate the auction sets, you get your securities. If it’s too high, your bid is rejected outright; if it matches the highest accepted rate, it may be partially filled. Competitive bidding is meant for institutions and investors deep in the bond market.
Either way, purchases go in $100 increments starting at $100.
How You Get Paid at Maturity
Treasury bills are discount securities. You buy them for less than face value and receive the full face value at maturity; the difference is your interest.6TreasuryDirect. Understanding Pricing and Interest Rates For example, a $10,000 26-week bill at roughly a 3.5% discount rate would cost about $9,823 upfront and pay back $10,000 six months later, for roughly $177 in interest.
At maturity, the face value is deposited straight into your linked bank account unless you’ve set up automatic reinvestment.
Reinvesting Automatically
TreasuryDirect can roll a maturing bill into a new bill of the same term. Set this up when you buy, or later through the ManageDirect tab by selecting Schedule Reinvestments. The number of consecutive reinvestments you can schedule depends on the term: up to 25 for a 4-week bill, 7 for a 13-week bill, and 3 for a 26-week bill.7eCFR. 31 CFR 363.205 – How Do I Reinvest the Proceeds of a Maturing Marketable Treasury Security
Each reinvestment buys at whatever rate the next auction sets, so your yield will drift up or down. You can cancel or change scheduled reinvestments, but not once the maturing bill enters its closed-book period, typically a day or two before maturity. If no matching auction is available on the maturity date, TreasuryDirect cancels the reinvestment and returns the proceeds to your bank.
Selling Before Maturity
You can’t sell a T-bill directly through TreasuryDirect. To sell early, you first transfer the bill to a bank, broker, or dealer, and that institution sells it on the secondary market for you.8TreasuryDirect. Selling Treasury Bills The transfer starts in ManageDirect: choose Transfer securities, select the bill, choose External Transfer, and complete Form 5511 (TreasuryDirect Transfer Request), which must be mailed in.
If you bought through a brokerage originally, selling is simpler; you place a sell order in the account. The price depends on current interest rates. If rates have risen since you bought, the market value will be lower than what you paid, and you may receive less than face value.
Taxes on T-Bill Interest
Interest on a Treasury bill is subject to federal income tax but exempt from all state and local income taxes.9Internal Revenue Service. Topic No. 403, Interest Received That state-tax exemption is meaningful if you live somewhere with a high income tax.
Interest is reported in the year the bill matures or is sold, not the year you bought it. Buy a 26-week bill in October and it matures the following April; the interest counts as income for the maturity year.10TreasuryDirect. Interest Income Reporting for Marketable Treasury Securities TreasuryDirect or your brokerage issues a 1099-INT each year showing interest on bills that matured or were sold that year.
Holding your bills in TreasuryDirect, you can have the system withhold federal income tax, up to 50 percent of the interest, each time a bill pays out. You set the percentage in your account settings.11TreasuryDirect. Tax Forms and Tax Withholding Useful if you’d rather not face a large bill at filing time.