Learn how Treasury bills work
Thirteen short lessons, with diagrams and small calculators you can change. Worked numbers are illustrative and are not current market rates.
Foundations
- What Treasury bills areShort-term government debt that pays no coupon. You buy below face value and receive face value at maturity.
- How bills are issuedThe path from a public announcement, through auction, to issue and later repayment.
- Bills versus notes and bondsSame issuer, different maturities and cash flows. Maturity and coupons change how each one behaves.
Pricing and yield
- Discount pricingHow a quoted discount rate turns into a price per 100, and why that price depends on the days remaining.
- Face valueThe amount a bill pays at maturity, and the basis for its price, your cost and your income.
- Yield to maturityWhy the discount rate understates your return, and how the investment rate fixes the comparison.
Markets and auctions
Holding and selling
- Maturity and settlementWhen cash and securities actually move, and what happens on the day a bill matures.
- Early sale considerationsA bill’s face value is known only at maturity. If you sell sooner, the market price decides your result.
- ReinvestmentWhen a bill matures you must decide again, at whatever rates exist then. That is reinvestment risk.
Risk and structure
- Risks of investing through an intermediaryA bill’s credit may be the government’s, but the chain between you and that bill adds its own risks.
- Government obligations versus corporate investment obligationsWho owes you the money is the first question. A company holding bills is not the same as a bill.
Put it into practice
Use the calculator with official rates, or try the simulator in a demo account.