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What is a T-Bill?

Mary McMahon
By
Updated May 16, 2024
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A Treasury Bill, often abbreviated as T-Bill, is a type of security issued by the United States Treasury through the Bureau of Public Debt. Along with an assortment of other securities, T-Bills are used to finance the United States Government by borrowing money from citizens. Investors purchase T-Bills when they become available, and when they mature after a set period of time, usually less than a year, the investors may redeem their T-Bills for the face value. The purchase price of the T-Bill serves as a temporary loan to the United States Government, which returns it when the T-Bill matures.

The minimum purchase amount for a T-Bill is $100 US Dollars (USD), and they are only sold in $100 USD increments. The T-Bill is sold at a discount, which is determined by the Bureau of Public Debt, but the Treasury pays the full face value when it is redeemed. For example, an investor might purchase a 90-day T-Bill for $900 USD, and earn a $100 USD return on the investment when the T-Bill is redeemed. Unlike many other securities, a T-Bill does not bear interest, but the return on a T-Bill is highly predictable and very stable, barring complete financial collapse of the United States Treasury.

Investors may choose to include T-Bills in their profiles because they are highly stable investments with a pre-set time to maturity and a dependable return. Unlike more risky investments, a T-Bill is unlikely to return a substantial sum, but when they are traded on large volume, they can represent a substantial return. Investors can potentially purchase millions of dollars worth of T-Bills, assuming that they possess the available capital. They are also extremely liquid assets, making them a versatile and useful addition to a diverse investment portfolio.

While private investors can and do purchase T-Bills, banks and other financial institutions are capable of purchasing them on a much larger scale, and thus make up the bulk of the trade in T-Bills on the day of the initial offering. Once purchased from the Treasury, a T-Bill can be sold or traded before it matures and is ready to be redeemed, and many individuals purchase T-Bills on the secondary market, from banks and institutions which purchased the bills from the Treasury. As compared with other Treasury securities, the T-Bill matures much more quickly, creating a rapid turnover investment, as opposed to the Treasury Note, which matures in two to 10 years, or Treasury Bonds, which take 10-30 years to mature.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

By anon75636 — On Apr 07, 2010

No, the US does not back financial products with gold. All assets are backed with the full faith and credit of the US government. The US has an excellent record of repaying debt. T-bills are considered the most stable and sure investment you can make.

By anon48467 — On Oct 12, 2009

Is a U.S. T-Bill a money market product?

By arrun — On May 02, 2009

I would like to ask what is the price of a 90-day T-Bill with Face value $10,000 with a discount rate of 8%. I calculated it as 10000/(1 + 90*8/360/100) = 9803.922. Is it so?

By abraham2 — On Dec 10, 2008

Is the United States backing T-Bill issues with gold? and what would be the percentage?

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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