Treasury Bills, commonly called T-Bills, are short-term debt securities issued by the U.S. government that mature in one year or less. You buy them for less than their face value and receive the full face value at maturity, and the difference is your return. Because they carry the full backing of the federal government, T-Bills are widely considered the closest thing to a risk-free investment available, and their yields serve as the baseline against which nearly every other interest rate in the economy is measured.
How the Discount Works
T-Bills don’t pay a coupon the way a savings account or a longer-term bond does. You buy the bill at a discount and collect the full face value when it matures. That gap is your earnings. Pay $9,800 for a $10,000 bill and you collect $200 at maturity. The lower the purchase price relative to face value, the higher the effective yield.
The minimum purchase is $100, and you can buy in $100 increments above that, so a large sum isn’t required to get started. Your purchase price is set at auction, which means the yield you earn reflects market conditions on auction day rather than a rate the Treasury announces ahead of time.
Available Maturities
The Treasury currently offers T-Bills in seven maturities: 4, 6, 8, 13, 17, 26, and 52 weeks. The 6-week bill is the newest, added to regular weekly issuance in June 2023. Shorter maturities suit investors who want their money back quickly; the 52-week bill locks in a rate for a full year. Each maturity runs on its own weekly auction cycle, with dates that shift around holidays.
How to Buy Treasury Bills
Through TreasuryDirect
TreasuryDirect is the government’s own online platform for buying Treasury securities without a broker or any transaction fees. You open an account with your Social Security number and bank details, pick the maturity you want, and place a non-competitive bid. The discounted purchase price is pulled from your linked bank account after the auction settles.
TreasuryDirect accepts only non-competitive bids. That means you agree to take whatever yield the auction produces rather than naming your own price, and in exchange your order is guaranteed to fill. For most individual investors that’s the right trade.
Through a Brokerage
You can also buy T-Bills through any standard brokerage account, either at auction or on the secondary market after issuance. A broker gives you more flexibility: you can pick up a bill only a few weeks from maturity for very short-term cash parking, or submit competitive bids at auction if you have a specific yield target. Some brokers charge a small commission or build in a markup, so check fees before buying. The secondary market for T-Bills is highly liquid, so prices stay tight and trades go through without much friction.
Competitive vs. Non-Competitive Bids
At auction, bidders choose one of two approaches. A non-competitive bid says you’ll take the going rate and ensures you get the bills you want. A competitive bid specifies the exact yield you’ll accept; if the auction clears below your yield, your bid is rejected. Institutional investors and dealers use competitive bids to manage large positions. Individual investors are almost always better off with non-competitive bids, which are capped at $5 million per auction — a ceiling that isn’t going to constrain anyone but institutions.
Selling Before Maturity
Most T-Bill investors hold to maturity and collect the face value. If you need cash sooner, you can sell on the secondary market, with a couple of catches.
Bills held in a brokerage account are easy: place a sell order and the trade settles quickly. Bills held in TreasuryDirect cannot be sold directly from that platform. You have to first transfer the security to a bank, broker, or dealer using FS Form 5511, then ask that institution to sell for you.
There’s also a 45-day holding period on newly purchased bills in TreasuryDirect. You can’t transfer or sell during those first 45 days. That effectively locks 4-week bills bought through TreasuryDirect until maturity, since they mature before the hold expires. If you might need early access, a brokerage is the better home.
The price you get when selling early depends on where interest rates have moved since you bought. If rates have risen, newer bills offer better yields than yours and your bill’s resale price drops. If rates have fallen, your bill becomes more valuable. Because T-Bills are short-dated, this price movement is modest compared to longer-term bonds, but it isn’t zero, and in a fast-moving rate environment you could sell at a small loss.
Tax Treatment
T-Bill earnings are subject to federal income tax but exempt from all state and local income taxes. That state exemption is a genuine advantage for investors in high-tax states and can add meaningful after-tax yield compared to a CD or corporate bond paying the same nominal rate.
You’ll receive a 1099-INT showing the interest earned during the tax year. TreasuryDirect posts the form to your account at the start of each year; if a brokerage holds your bills, the broker issues it. The interest appears in Box 3 (interest on U.S. Treasury obligations), not Box 1.
For individual investors on the cash method, income is taxable in the year the bill matures and pays out, even if you bought it the prior calendar year. A 26-week bill purchased in September and maturing the following March produces interest reported on next year’s return. Businesses using the accrual method report interest as it accrues. TreasuryDirect also offers voluntary federal withholding of up to 50 percent on interest payments, which can simplify estimated taxes if T-Bills are a significant income source.
Risks Worth Understanding
Credit risk is essentially off the table. The U.S. government has never defaulted on a Treasury obligation, and T-Bills are backed by the full faith and credit of the federal government. That’s what makes them the global benchmark for safety.
The real risk is inflation. Earn 4 percent on a 13-week bill while inflation runs 4.5 percent and your purchasing power quietly shrinks. Short maturities help, because you can reinvest at new rates every few weeks, but during periods of persistent inflation outpacing short-term rates, T-Bills won’t keep you whole.
Opportunity cost is the other consideration. Money parked in T-Bills isn’t invested in assets with higher long-term return potential. For an emergency fund or a near-term savings goal, that trade-off makes sense. For a 30-year retirement portfolio, it usually doesn’t. T-Bills are a tool, and the right question is whether they fit the job you’re doing right now.
How T-Bills Compare to Other Short-Term Options
Investors choosing where to park short-term cash usually weigh T-Bills against CDs, money market funds, and high-yield savings accounts.
CDs
Bank CDs are FDIC-insured up to $250,000 per depositor, per institution. T-Bills have no dollar cap on their government backing, which matters for balances above the FDIC limit. CDs typically impose an early withdrawal penalty if you cash out before maturity; T-Bills can be sold on the secondary market, potentially at a small gain or loss but without a fixed penalty. The state tax exemption on T-Bill interest often tips the after-tax comparison in T-Bills’ favor, especially in states with income tax rates above 5 percent.
Money Market Funds
Government money market funds invest heavily in T-Bills and similar short-term government debt, so yields tend to track closely. Money market funds offer daily liquidity, so you can move cash in and out without waiting for a maturity date or completing a transfer. Buying T-Bills directly locks in a known yield at auction and avoids a fund’s expense ratio. For a lump sum earmarked for a specific number of weeks, a T-Bill is cleaner. For unpredictable access needs, a money market fund is more practical.
High-Yield Savings Accounts
High-yield savings accounts offer FDIC insurance and same-day access, but rates can change at the bank’s discretion at any time. A T-Bill locks in your rate for the full term. Savings account interest is taxable at both federal and state levels; T-Bill interest is exempt from state tax. On the other hand, a savings account requires no auction participation and no learning curve. You deposit money and earn interest. For someone not comfortable with the auction process, that simplicity has real value.