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Treasury bills, or T-bills, are short-term debt obligations issued by the U.S. Department of the Treasury with maturities ranging from 4 weeks to 52 weeks. You buy them at a discount to face value and receive the full face value at maturity. The difference between the purchase price and the face value is your return, equivalent to interest income. T-bills are the shortest-duration and most liquid securities in the U.S. government bond market, and their yields set the baseline for risk-free short-term rates throughout the global financial system.
Think of a T-bill as a loan you give to the U.S. government that pays you back slightly more than you lent after a few weeks or months.
The U.S. Treasury currently issues T-bills in seven maturity tranches: 4-week, 6-week, 8-week, 13-week, 17-week, 26-week, and 52-week. The Treasury auctions these instruments on a regular schedule. The 4-week, 8-week, and 52-week T-bills are auctioned every four weeks. The 13-week and 26-week T-bills are auctioned every week. The 17-week T-bill is auctioned every four weeks.
You can participate in Treasury auctions directly through TreasuryDirect, the Treasury's online platform, with no transaction fee. You can also buy T-bills on the secondary market through a broker or bank, where bid-ask spreads apply. Minimum purchase amount through TreasuryDirect is $100, in $100 increments.
T-bills are quoted using two different rate conventions, which can cause confusion. The bank discount rate is calculated based on face value and a 360-day year. The bond equivalent yield, also called the investment yield or coupon equivalent yield, is calculated based on the purchase price and a 365-day year. The bond equivalent yield is always slightly higher than the bank discount rate and is the more meaningful comparison figure when you are evaluating T-bills against other interest-bearing securities.
For example, a 26-week T-bill with a face value of $10,000 purchased for $9,750 has a dollar return of $250. The bank discount rate calculation uses the $250 return divided by the $10,000 face value multiplied by 360 divided by 182 days. The bond equivalent yield uses the $250 return divided by the $9,750 purchase price multiplied by 365 divided by 182 days, producing a modestly higher percentage.
T-bill yields track closely with the federal funds rate target set by the Federal Reserve. As the Fed cut rates four times in 2025 for a total of 100 basis points, short-term T-bill yields declined in parallel. As of early 2026, the 13-week T-bill yield was trading in the range of 4.2% to 4.5%, reflecting the Fed funds rate in the 4.25% to 4.50% range following the 2024 easing cycle.
T-bill yields also reflect short-term supply and demand dynamics around Treasury debt ceiling episodes, quarterly tax payments, and large government cash management operations. During periods of high Treasury issuance, yields can briefly rise above what the Fed's policy rate alone would imply.
Interest income from T-bills is subject to federal income tax but exempt from state and local income taxes. This exemption makes T-bills more attractive relative to bank savings accounts or money market funds for investors in high state-tax states. A New York City resident in the top combined state and city tax bracket of approximately 14.8% effectively earns a higher after-tax yield from a T-bill compared to a taxable investment at the same gross yield.
You report T-bill interest income on your federal return in the year the bill matures, not the year you purchase it. If you buy a 6-month T-bill in October 2025 that matures in April 2026, the interest is taxable income for 2026, not 2025.
Institutional investors use T-bills as cash management instruments because they combine safety, liquidity, and yield in a structure with no credit risk. Corporate treasurers park operating cash in T-bills when yields exceed money market fund yields on an after-tax basis. Fund managers hold T-bills as the cash equivalent component of their portfolios while searching for higher-return investments.
T-bill yields also serve as the risk-free rate assumption in financial models. The Capital Asset Pricing Model uses the risk-free rate as the starting point for calculating required returns on equity investments, and the 3-month or 6-month T-bill yield is the most common proxy for this rate in practice.
You do not need to buy T-bills directly to gain exposure to them. Government money market funds primarily hold T-bills and other short-term government securities, offering same-day liquidity and yields that closely track the T-bill market. Vanguard, Fidelity, and Schwab each offer Treasury money market funds with expense ratios below 0.15% annually that provide T-bill-equivalent returns without requiring you to manage individual bill purchases and reinvestments.
With deep roots in traditional finance and the digital asset industry, Acquire.Fi operates as a specialist M&A advisory firm. Coverage spans M&A, secondaries, OTC, and capital markets advisory across digital assets and frontier tech. Decades of combined experience across every stage of the deal lifecycle.
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