Treasury Bill

Treasury Bill

A debt security backed by the full faith and credit of the United States government with a maturity of one year or less. Very commonly, T bills have a maturity of a few weeks to a few months. They are purchased at a discount and then redeemed for par; T bills do not pay interest. For example, an investor may purchase a $5,000 bill for $4,500. While he/she will not earn any coupon payments, he/she will receive $5,000 in no more than a year. They are low-risk, low-return investments. Private investors may purchase T bills in small quantities, but the bulk of the T bill market comes from institutional investors, especially banks. See also: Treasury note, Treasury bond.

---

Treasury bill

A short-term debt security of the U.S. government that is sold in minimum amounts of $10,000 and multiples of $5,000 above the minimum. Bills with 13-week and 26-week maturities are auctioned each Monday, and 52-week bills are sold every 4 weeks. These obligations, which are very easy to resell, may be purchased through brokers, commercial banks, or directly from the Federal Reserve. Also called T bill. See also bank-discount basis, certificate of indebtedness, Form PD 4633-1.

---

Treasury bill (T-bill). Treasury bills are the shortest-term government debt securities.

They are issued with a maturity date of 4, 13, or 26 weeks. The 13- and 26-week bills are sold weekly by competitive auction to institutional investors, and to noncompetitive bidders through Treasury Direct for the same price paid by the competitive bidders.

---

Treasury Bill (T-Bill)

What Does Treasury Bill (T-Bill) Mean?

A very short-term debt obligation issued and backed by the U.S. government with a maturity of less than one year. T-bills are sold in $1,000 denominations up to a maximum purchase of $5 million; common maturities are one month (4 weeks), three months (13 weeks), and six months (26 weeks). T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments as conventional bonds do, the purchaser buys at a discount and then gets the full face amount at maturity.

Investopedia explains Treasury Bill (T-Bill)

If an investor buys a 13-week T-bill priced at $9,800, essentially, the U.S. government (and its nearly bulletproof credit rating) writes the investor an IOU for $10,000, which will be paid to the investor in full at maturity (13 weeks). T-bills do not pay interest the way other bonds do. Instead, the difference between the discounted value paid and the maturity value received is the income component. In this case, the T-bill pays a 2.04% interest rate ($200/$9,800 = 2.04%) over a three-month period.

Related Terms:
• Discount Rate
• Equity Risk Premium
• Risk-Free Rate of Return
• Treasury Bond—T-Bond
• U.S. Treasury