United States Treasury bill

A **United States Treasury bill**, or **T-bill**, is a short-term, marketable debt security issued by the U.S. Department of the Treasury. Regular bills have terms ranging from four to 52 weeks. They are sold at a discount or at face value, and the holder receives face value at maturity. Unlike coupon-paying Treasury securities, bills do not make periodic interest payments. ^[1]

Structure and purpose

A bill is an obligation of the federal government rather than a deposit at a bank. The Treasury issues marketable securities through auctions to finance government borrowing; bills constitute the short-term part of that market. They are distinct from Treasury notes and bonds, which have longer terms and generally make periodic interest payments. Treasury securities are backed by the full faith and credit of the United States. ^[1][2][3]

The amount due at maturity is the bill’s **face value**, also called its par value. If a bill is issued below face value and held to maturity, the difference between its purchase price and its maturity payment is the holder’s return before taxes and any transaction costs. For example, a bill acquired for $980 that pays $1,000 at maturity produces a $20 difference. This example illustrates the payment structure; it is not a quotation of an auction price or an annualized yield. Treasury notes and bonds differ because their periodic payments make the timing of their returns different from that of a bill. ^[1][2]

Treasury describes bills as *marketable*: ownership need not continue until maturity. A holder may instead sell a bill before it matures. In that case, the amount received is its sale price, not necessarily its face value or original purchase price. This distinction separates the Treasury’s promise to pay face value at maturity from the market value of an outstanding bill. ^[1][4]

Terms and issuance

TreasuryDirect describes regular bill terms as ranging from four weeks to 52 weeks. An auction announcement specifies the terms of a particular offering, including its security description, auction date, issue date and maturity date. The interval between the auction and issue dates matters: winning bidders learn the auction outcome before the security is issued, while the bill’s maturity payment is tied to the stated maturity date. Treasury’s auction data also identify securities by CUSIP and record whether an offering reopens an outstanding security. ^[1][4]

A **reopening** offers an additional amount of an existing security rather than necessarily creating a security with a new maturity date. Consequently, the time remaining until maturity on a reopened bill can differ from that security’s original term. Treasury’s auction records distinguish original issue dates from later issue dates and flag reopenings. References to a bill’s original term should therefore not automatically be read as the remaining time to maturity when it is purchased later. ^[4]

The Treasury also issues **cash management bills**, or CMBs, at various times and for variable terms. They are related to regular bills but are not offered for purchase in TreasuryDirect; Treasury says they are available through a bank, broker or dealer. A cash management bill should not be assumed to follow the regular bill schedule merely because both securities have short maturities. The terms and availability of any individual offering are set out in its announcement. ^[1][5]

Auctions and access

The Treasury sells marketable securities by auction. In a **noncompetitive** bid, the bidder agrees to accept the rate or yield determined by the auction rather than specifying one. In a **competitive** bid, the bidder specifies an acceptable rate, yield or discount margin; acceptance depends on the auction outcome. The resulting auction price determines what a successful purchaser pays for a bill relative to its face value. Treasury publishes offering announcements and results, allowing the terms of a specific auction to be distinguished from general descriptions of bills. ^[4]

Regular bills can be purchased through TreasuryDirect or through a bank, broker or dealer. TreasuryDirect’s description of cash management bills expressly excludes them from purchase through its own system. The route used to acquire or hold a bill is relevant to how a holder can arrange a sale before maturity: TreasuryDirect is not itself a venue for immediately selling a security into the secondary market. Treasury has described transferring securities to a commercial account as an alternative for holders who want to sell them. ^[1][5][6]

Published auction results commonly report a bill’s **high rate**, **price** and **investment rate** separately. These figures should not be treated as interchangeable. The price expresses the amount paid relative to face value, while a quoted rate is an annualized measure rather than the dollar amount earned over the bill’s actual life. For instance, Treasury’s results for a 119-day bill auctioned on February 22, 2023, separately listed a high rate of 4.830%, a price of 98.403417 per $100 of face value and an investment rate of 4.977%. Those figures describe that historical auction, not a standing return available on Treasury bills. ^[7]

Returns and secondary-market prices

For a bill held from purchase to maturity, the relevant cash flows are its purchase cost and the face value paid at maturity. A buyer comparing bills of different maturities must also account for the length of time between those cash flows. Annualized quotations provide a way to express a short holding-period return on a yearly basis, but the reported percentage is not the percentage of face value paid to the holder as a separate coupon. Treasury’s publication of both price and investment rate makes that distinction visible in auction results. ^[1][7]

Before maturity, an outstanding bill’s price can change with market interest rates and demand. When market yields rise, the price at which an existing fixed-payment security can be sold generally falls; the reverse generally occurs when yields fall. A bill sold early can therefore produce a return different from the difference between its original purchase price and face value. Its short maturity does not eliminate this price risk, although the maturity payment remains defined by the security’s terms. ^[1][4][8]

Bills also present **reinvestment risk**. A holder who receives face value at maturity and then purchases a new bill is entering a new transaction at a rate determined under conditions prevailing at that later time. The return on the matured bill does not establish the price or yield of its replacement. This follows from the combination of the bill’s fixed maturity payment and Treasury’s use of separate auctions to price new securities. ^[1][4]

Tax treatment and related products

According to the Internal Revenue Service, interest income from Treasury bills, notes and bonds is subject to federal income tax but exempt from state and local income taxes. That treatment concerns the interest income from the Treasury obligation; individual reporting circumstances can differ, particularly when a security is bought or sold outside its original issuance and maturity dates. The IRS publishes separate guidance on original issue discount and reporting for debt instruments. ^[9][10]

A bill is not the same product as a bank certificate of deposit. The bill is a Treasury debt obligation whose market price can fluctuate before maturity; a certificate of deposit is a bank product that may qualify for deposit insurance when held at an insured institution. Nor does buying a share of a fund that holds bills confer ownership of a particular bill with a specified maturity payment to the shareholder. These distinctions concern the legal claim held, how its value is determined and what happens when the underlying bills mature. ^[2][4][11]

Place in U.S. financial markets

Treasury bills are part of the broader Treasury securities market observed by participants in short-term funding markets. The Federal Reserve Bank of New York conducts Treasury-security transactions in the secondary market under authority from the Federal Open Market Committee. Its monetary-policy operations are distinct from the Treasury’s issuance of new bills at auction. Repo and reverse-repo operations likewise involve securities transactions used in implementing monetary policy; they should not be confused with a retail investor’s purchase of a newly issued bill. ^[4][12][13]

The distinction between **issuer**, **auction purchaser** and **secondary-market holder** is central to understanding a bill. The Treasury sets the obligation’s terms and pays face value at maturity. An auction establishes the initial price for an offering, while subsequent trades can occur at prices reflecting current conditions. Neither a previous auction result nor the bill’s face value alone states what an investor would pay to buy it, or receive to sell it, on a particular date before maturity. ^[1][4][7]