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Treasury bills, or T-bills, are short-term marketable securities issued electronically by the U.S. Treasury. They are sold at a discount or at face value, make no periodic interest payments, and pay face value at maturity; the difference between the purchase price and face value is the interest. You can buy them through TreasuryDirect or a bank, broker, or dealer, and choose a term that fits when you need the money.
What are Treasury bills?
T-bills are U.S. Treasury securities with terms from 4 to 52 weeks. Treasury lists 4-, 6-, 8-, 13-, 17-, 26-, and 52-week terms. Bills are electronic securities: you buy them at auction and receive their face value when they mature.
A bill does not pay interest along the way. Its return is the difference between what you paid and the face value Treasury pays at maturity. For example, TreasuryDirect illustrates a $1,000 face-value bill bought for $999.86; the $0.14 difference is the interest. This is an illustrative example, not a current price or yield.
How do T-bill auctions work?
Treasury sets the rate through an auction. The bidding method affects whether you set an acceptable rate and whether you are assured an award.
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| Bid type | Where available | How it works |
|---|---|---|
| Noncompetitive | TreasuryDirect, as well as financial intermediaries | You accept the rate determined at auction. TreasuryDirect accepts only noncompetitive bids. |
| Competitive | Bank, broker, or dealer | You specify the discount rate you will accept. Your bid may be fully awarded, partially awarded, or rejected. |
Check current Treasury auction results for rates. Rates are set at auction, so do not assume one term will always pay more than another. Auction dates and issue dates vary; consult the current Treasury schedule for specific dates.
How to buy Treasury bills
- Choose a purchase route. Open or use a TreasuryDirect account for a noncompetitive auction bid, or ask a bank, broker, or dealer about its available auction and secondary-market services, fees, and requirements.
- Choose a term. Match the maturity date to when you expect to need the money. Consider how often you want proceeds to become available and compare the actual auction rates for the terms you are considering.
- Review the bid and purchase details. In TreasuryDirect, place a noncompetitive bid and accept the auction-set rate. Through an intermediary, confirm whether you are placing a noncompetitive or competitive bid and understand the chance of receiving a full award.
- Plan for maturity. Treasury pays the bill’s face value when it matures. Check the account or intermediary’s instructions for how proceeds are handled.
TreasuryDirect lists a $100 minimum purchase and purchases in $100 increments. Its published information also lists a maximum of $10 million for a noncompetitive bid; check current official terms before investing, since limits may be subject to auction rules and investor-specific constraints.
Can you sell a T-bill before maturity?
A T-bill may be sold before maturity. If you need to sell, ask your bank, broker, or dealer for the applicable market price and any terms or costs. The sale price and return are not guaranteed to match the amount you would receive by holding the bill to maturity.
Taxes on Treasury bills
TreasuryDirect says interest from bills is subject to federal income tax and exempt from state and local taxes. Tax rules can depend on individual circumstances; consult current tax guidance or a qualified tax professional about your situation.
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FAQ
What is the minimum amount to buy a T-bill?
TreasuryDirect lists a $100 minimum and purchases in $100 increments. Confirm current terms before placing an order.
Do T-bills pay interest every month?
No. T-bills do not make periodic interest payments. The interest is the difference between the purchase price and face value paid at maturity.
Can I buy a T-bill through TreasuryDirect?
Yes. TreasuryDirect accepts noncompetitive bids for bills. A noncompetitive bidder accepts the rate set at auction.
Are T-bills state-tax-free?
TreasuryDirect says bill interest is exempt from state and local taxes, while subject to federal income tax. Check current tax guidance for your circumstances.
Where can I check current T-bill rates and auction dates?
Check the U.S. Treasury’s current auction results and schedule. Rates and dates change, and the term alone does not establish the rate you will receive.
Quick Recap
Sources
- U.S. Department of the Treasury, TreasuryDirect: Treasury Bills
- U.S. Department of the Treasury, TreasuryDirect: Buying a Marketable Security
- U.S. Department of the Treasury, TreasuryDirect: Treasury Bills auction information
- U.S. Department of the Treasury, TreasuryDirect: Treasury Bills schedule information
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