Treasury Bills: Quick Guide and Market Insights

When you hear Treasury bills, short‑term debt securities issued by the U.S. Treasury that mature in four, 13, 26 or 52 weeks. Also known as T‑bills, they let the government borrow funds at the lowest risk level because they’re backed by the full faith and credit of the United States. Treasury bills encompass government securities, they require investors to understand the yield curve, and they influence short‑term interest rates across the money market.

How the Market Sets T‑Bill Prices

The price you pay for a Treasury bill is set at auction, where the Federal Reserve plays a key role by shaping overall monetary policy. When the Fed trims its policy rate, auction demand usually climbs, pushing prices up and yields down. Conversely, a rate hike squeezes demand, lowers prices, and lifts yields. This relationship creates a clear short‑term interest rate signal for the broader economy. Money market funds, which aim to keep capital safe while earning modest returns, often hold large blocks of T‑bills because the instruments are liquid, have predictable cash flows, and fit the fund’s low‑risk mandate.

Investors also watch the shape of the yield curve—whether short‑term yields sit above or below longer‑term rates—to gauge expectations for future growth and inflation. A flat or inverted curve can signal a slowdown, prompting some to pile into Treasury bills for safety. Meanwhile, a steep curve suggests confidence in growth, leading others to chase higher‑yielding Treasury notes or bonds.

Compared with longer‑dated Treasury notes and bonds, Treasury bills have virtually no coupon payments; instead, they are sold at a discount and mature at face value. That discount represents the investor’s return, making the calculation straightforward: (Face Value – Purchase Price) ÷ Purchase Price × 360 ÷ Days‑to‑Maturity. The simplicity attracts both retail savers and institutional players looking for a quick, secure parking spot for cash.

Real‑world yields matter because inflation can erode the purchasing power of a T‑bill’s return. Tracking the inflation rate alongside nominal T‑bill yields helps you estimate the real yield. When inflation climbs above the T‑bill yield, the investment effectively loses value, so many investors shift to inflation‑protected securities or other assets that can keep pace.

If you want to own Treasury bills, the easiest route is through TreasuryDirect, the government’s online portal that lets individuals bid directly in auctions. You can also buy T‑bills through most brokerage accounts, where they appear under the “fixed income” or “government securities” section. Remember to factor in any commission fees if you go through a broker, and be aware of the settlement period—usually one business day after the auction.

Understanding Treasury bills gives you a solid foundation for navigating short‑term markets, managing cash, and building a diversified portfolio. Below you’ll find a curated set of articles that dive deeper into specific aspects of Treasury bills, from auction mechanics and yield analysis to practical investing strategies and tax considerations. Browse the collection to sharpen your knowledge and put what you learn into action.