U.S. Treasury bills, commonly known as T-bills, are short-term debt securities issued by the U.S. Department of the Treasury. They allow investors to lend money to the U.S. government for a short period and receive the face value when the bill matures.
Treasury bills are popular among investors who want to manage cash, save for short-term goals, diversify a portfolio, or earn interest without committing money for several years. They can be purchased directly through the official TreasuryDirect website or through a bank or brokerage firm. The minimum purchase is generally $100, in increments of $100.
This guide explains how T-bills work, how to buy them, how returns are calculated, how taxes apply, and what risks investors should understand before investing.
1. What are U.S. Treasury bills?
Treasury bills are short-term securities issued by the U.S. government to finance its borrowing needs.
Unlike many bonds, T-bills generally do not pay periodic interest. Instead, they are usually sold at a discount to their face value. At maturity, the investor receives the full face value, and the difference represents the investment’s return before taxes and applicable costs.
For example, you might purchase a Treasury bill with a face value of $1,000 for $985. At maturity, you receive $1,000. The $15 difference is your gross return.
The actual purchase price and return depend on the auction result or the price available in the secondary market.
2. Treasury bills vs. Treasury notes and bonds
The U.S. Treasury offers several types of marketable securities. The main differences are their maturities and payment structures.
| Security | Typical maturity | How returns are paid |
|---|---|---|
| Treasury bills (T-bills) | 4 to 52 weeks | Usually the difference between purchase price and face value, paid at maturity |
| Treasury notes | 2 to 10 years | Fixed interest, generally paid every six months |
| Treasury bonds | 20 or 30 years | Fixed interest, generally paid every six months |
| Treasury Inflation-Protected Securities (TIPS) | 5, 10, or 30 years, depending on the offering | Interest and principal are adjusted according to inflation rules |
| Floating Rate Notes (FRNs) | Generally 2 years | Variable interest payments |
Treasury bill terms include 4, 6, 8, 13, 17, 26, and 52 weeks. Availability and auction dates should be checked on the official Treasury website.
Which should you choose?
- Consider T-bills if you want a relatively short investment period.
- Consider Treasury notes if you want periodic interest over several years.
- Consider longer-term Treasury bonds if you have a longer investment horizon and understand interest-rate risk.
- Consider TIPS if inflation protection is important to your investment strategy.
These securities are not interchangeable. Their maturity, pricing, and risk characteristics differ.
3. How much money do you need to start?
The minimum purchase for Treasury bills through TreasuryDirect is generally $100, with additional purchases in $100 increments. TreasuryDirect also sets limits for noncompetitive bids.
Here are illustrative examples:
| Face value | Example purchase price | Gross return at maturity |
|---|---|---|
| $100 | $98.50 | $1.50 |
| $500 | $492.50 | $7.50 |
| $1,000 | $985.00 | $15.00 |
| $5,000 | $4,925.00 | $75.00 |
| $10,000 | $9,850.00 | $150.00 |
These examples assume the same illustrative price of 98.5 per $100 of face value. They are not current market quotes or promised returns. Actual prices depend on the maturity, prevailing interest rates, and auction or market conditions.
You do not need to invest all your savings. Before buying T-bills, keep enough accessible cash for emergencies and upcoming expenses.
4. How to buy Treasury bills: step-by-step
There are two main ways to purchase Treasury bills: directly through the U.S. Treasury’s website or through a bank or brokerage firm.
Option 1: Buy directly through TreasuryDirect
Official website: TreasuryDirect.gov
TreasuryDirect is the U.S. government’s official online platform for purchasing and holding Treasury securities. There are no account-opening or holding fees charged by TreasuryDirect.
Follow these general steps:
- Check eligibility. Review the account-opening requirements on TreasuryDirect before applying. Requirements for individuals and entities differ.
- Open an account. Complete the registration and identity-verification process.
- Link a bank account. TreasuryDirect uses the designated funding account to collect purchase payments and distribute proceeds.
- Choose the bill’s maturity. Available terms generally range from 4 to 52 weeks.
- Enter the purchase amount. Purchases are generally made in increments of $100.
- Submit a noncompetitive bid. You agree to accept the yield determined at the auction.
- Fund the purchase. Make sure sufficient money is available before the issue date.
- Check your holdings. After the auction, review the final price, maturity date, and payment details.
When you place an order through TreasuryDirect, you do not know the final auction yield in advance. The auction determines the price and yield. A noncompetitive bid generally allows you to receive the full amount requested, subject to the program’s rules and limits.
Option 2: Buy through a brokerage account
You can also purchase Treasury bills through a brokerage firm or participating financial institution.
The process usually involves:
- Opening and funding a brokerage account.
- Finding the Treasury bills section of the trading platform.
- Selecting a bill by maturity date or CUSIP.
- Choosing whether to participate in an auction or buy an existing bill.
- Reviewing the price, estimated yield, and fees.
- Submitting the order and confirming the transaction.
Brokerages may provide access to both newly issued Treasury bills and the secondary market. They may also offer more convenient ways to sell or trade securities than TreasuryDirect.
Compare brokerage fees, minimum account requirements, available maturities, and customer eligibility before choosing a provider.
Can someone living outside the United States buy Treasury bills?
Potentially, yes, but eligibility depends on the platform, the investor’s country of residence, identity documents, tax status, and funding arrangements.
If you live outside the United States, do not assume you can open a TreasuryDirect account. Check its current eligibility requirements first. An international brokerage that provides access to U.S. government securities may be an alternative, provided it accepts residents of your country.
International investors should also consider currency-conversion charges, local tax obligations, reporting requirements, and any U.S. tax documentation or withholding that may apply.
5. What is a Treasury bill auction?
The U.S. Treasury issues bills through scheduled auctions. Investors submit bids for a particular security and maturity.
There are two principal types of bids.
| Bid type | How it works | Typical user |
|---|---|---|
| Noncompetitive | You accept the yield determined by the auction and generally receive the amount requested | Individual investors who want a straightforward purchase |
| Competitive | You specify the minimum yield or discount rate you are willing to accept; the bid may be accepted, partially filled, or rejected | Investors with more experience or specific pricing requirements |
TreasuryDirect accepts noncompetitive bids for marketable Treasury securities. Competitive bids must be placed through an eligible bank, broker, or dealer.
The Treasury publishes auction announcements, schedules, and results. You can review these on the official TreasuryDirect auction information pages.
6. How Treasury bill returns are calculated
Treasury bills typically pay the face value at maturity rather than making regular interest payments.
Your gross return is calculated as:
\[ \text{Gross return}=\text{Face value}-\text{Purchase price} \]
The holding-period return is:
\[ \text{Holding-period return}= \frac{\text{Gross return}}{\text{Purchase price}}\times100 \]
Example: Investing $10,000
Suppose you buy Treasury bills with a face value of $10,000 for $9,850.
Initial investment
$9,850
Amount received at maturity
$10,000
Gross return
$150
Holding-period return
1.52%
Illustrative figures only. The example does not represent a current auction yield or a specific maturity.
The holding-period return is approximately 1.52%. However, the annualized return depends on how long the bill is held. A 1.52% return over eight weeks is not the same as a 1.52% return over one year.
When comparing Treasury bills, use the quoted investment yield or an appropriate annualized yield calculation rather than comparing raw dollar profits alone.
The official TreasuryDirect website provides more information about Treasury bill pricing and interest rates.
7. Treasury bill taxes in the United States
For U.S. taxpayers, interest income from Treasury bills is generally subject to federal income tax, but exempt from state and local income taxes. The discount earned on a bill is generally treated as interest income under the applicable tax rules.
The actual tax owed depends on your tax situation. There is no single net return that applies to every investor.
For investors who are not U.S. tax residents, the treatment may be different. Certain qualifying portfolio interest can be exempt from U.S. withholding tax, but eligibility, documentation, and other rules matter. The tax treatment in the investor’s country of residence may also apply.
Before investing, determine:
- Whether you are a U.S. tax resident.
- Whether the investment’s earnings are taxable in your country of residence.
- Whether your broker requires tax forms or other documentation.
- Whether any withholding or reporting obligations apply.
Consult the IRS or a qualified tax professional if your tax residency or reporting obligations are unclear.
8. Can you sell Treasury bills before maturity?
Yes. Treasury bills can generally be sold before maturity through the secondary market, but the process depends on where they are held.
If you hold a bill through a brokerage account, you can normally place a sell order through that broker, subject to market availability.
If you hold a bill in TreasuryDirect, you generally must transfer it to a bank, broker, or dealer before selling it. TreasuryDirect also imposes a 45-day holding restriction on newly issued marketable securities before they can be transferred, subject to its specific rules. This makes TreasuryDirect less convenient if you may need to sell quickly.
The price you receive can be higher or lower than your original purchase price. If market yields rise, the price of an existing bill may fall; if yields decline, its price may rise.
If you need the money on a particular date, choosing a bill that matures around that date may reduce the need to sell early. It does not eliminate all risks.
9. What are the risks of Treasury bills?
Treasury bills are often regarded as relatively low-risk investments because they are backed by the U.S. government. However, low risk does not mean no risk.
Inflation risk: If inflation exceeds your return, the purchasing power of your money may decline.
Reinvestment risk: When a bill matures, new bills may offer lower yields than those available when you originally invested.
Early-sale risk: Selling before maturity may result in a lower price than you paid.
Liquidity and operational considerations: Although Treasury bills are generally liquid, market conditions and the platform you use can affect the timing and cost of selling.
Currency risk: If your expenses are in euros, lek, pounds, or another currency, changes in the U.S. dollar exchange rate can increase or reduce your return when converted back into your spending currency.
Sovereign and market risk: Treasury bills are obligations of the U.S. government, but they are not bank deposits and are not FDIC-insured deposits. Their value and payment arrangements should not be confused with deposit insurance.
10. Treasury bills vs. savings accounts and CDs
Treasury bills are not always the best option for every savings goal.
| Feature | Treasury bills | Savings account | Certificate of deposit (CD) |
|---|---|---|---|
| Return | Determined by purchase price and maturity value | Usually variable, depending on account terms | Usually fixed for the term, depending on the CD |
| Access to money | At maturity or by selling, subject to the platform | Generally accessible, subject to account rules | May have an early-withdrawal penalty |
| Minimum investment | Generally $100 | Varies by bank | Varies by bank |
| Federal tax | Generally taxable interest income | Generally taxable interest income | Generally taxable interest income |
| State and local tax on interest | Generally exempt | Generally taxable, subject to local rules | Generally taxable, subject to local rules |
| Deposit insurance | Not an FDIC-insured deposit | Eligible deposits may be FDIC-insured | Eligible CDs may be FDIC-insured |
Eligible bank deposits are generally insured by the FDIC up to $250,000 per depositor, per insured bank, per ownership category, subject to applicable rules. Treasury bills are obligations of the federal government rather than insured bank deposits.
For short-term money, compare the after-tax return, liquidity, and maturity date. A higher quoted yield is not automatically better if the investment does not fit when you need the cash.
11. Treasury bill investment strategies
Match the maturity to your goal
If you are saving for an expense in three months, consider bills that mature around that time instead of locking the money into a longer investment.
Build a Treasury bill ladder
A bill ladder spreads money across multiple maturity dates. For example, an investor might divide available funds among four-, eight-, thirteen-, and twenty-six-week bills, depending on the available offerings and cash needs.
As each bill matures, the investor can spend the proceeds or reinvest them at the yields then available. A ladder can provide periodic access to funds, although it does not guarantee a particular return.
Reinvest at maturity
TreasuryDirect supports reinvestment for eligible marketable securities. Reinvesting can help maintain an ongoing investment plan, but future yields are not guaranteed to match the original yield.
Keep emergency savings accessible
Do not put all your available cash into Treasury bills. Keep enough money accessible for emergencies, bills, and other short-term commitments.
Compare the net return
Before investing, compare the quoted yield, maturity, tax treatment, and any brokerage charges. If you are investing from outside the United States, also account for exchange rates and cross-border tax considerations.
12. Frequently asked questions
What is the minimum amount to buy Treasury bills?
The general minimum is $100, with additional purchases in $100 increments. Check the specific security and platform for applicable limits.
Can beginners buy Treasury bills?
Yes. A noncompetitive auction bid is often the simplest way to participate because you accept the yield determined at auction rather than specifying your own minimum yield.
Are Treasury bills guaranteed?
They are obligations of the U.S. government, which undertakes to pay according to the security’s terms. However, they are not risk-free investments, and selling before maturity can produce a loss.
How often do Treasury bills pay interest?
T-bills generally do not pay periodic interest. The investor receives the face value at maturity, and the difference between the purchase price and face value represents the return.
Are Treasury bills tax-free?
No. For U.S. taxpayers, their interest income is generally subject to federal income tax. It is generally exempt from state and local income taxes. Investors outside the United States may have different U.S. and local tax obligations.
Can non-U.S. residents buy Treasury bills?
Some international investors can access U.S. Treasury securities through eligible financial institutions or brokerage accounts. Eligibility and tax treatment depend on the investor’s circumstances and the provider’s requirements.
What happens when a Treasury bill matures?
The face value is paid to the designated account or handled according to the holding platform’s procedures. You can then use the proceeds or reinvest them in another eligible security.
Where can I check current Treasury bill yields?
Use the official TreasuryDirect Treasury bill page and its links to recent auction results. Rates change with market conditions, so avoid relying on outdated examples or advertised rates that do not match your selected maturity.
Buying Treasury bills in the United States is relatively straightforward: choose an appropriate maturity, compare the available yields, purchase through TreasuryDirect or a brokerage firm, and plan how you will use the proceeds at maturity.
The general minimum purchase is $100, and T-bills typically earn a return through the difference between their purchase price and face value. They can be useful for short-term cash management, but inflation, reinvestment, currency, and early-sale risks still matter.
The most suitable investment is the one that matches your time horizon, liquidity needs, tax situation, and tolerance for risk—not necessarily the one with the highest advertised yield.
This article is for educational purposes only and does not constitute individualized financial or tax advice.
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