Buy US Treasury Bills (T-Bills)

Bonds vs Notes vs Bills

T-Bonds - When an investor buys a T-bond, they are essentially lending money to the federal government and in return, the government pays the investor a fixed interest rate every six months until the bond matures.

T-Notes - T-notes are similar to Treasury bonds, but are short-term investments instead of long-term. They can be purchased in $100 increments at government auctions, brokers or at Treasury Direct website. Investors can choose to hold T-notes until maturity or sell them early in the secondary market

T-Bills - Treasury bills, or T-bills, are short-term debt instruments issued by the U.S. Department of the Treasury to fund government operations. They are considered safe investments because they are backed by the U.S. government, which has never defaulted on its debts. T-bills are sold at a discount from their face value and mature at face value, with the difference between the two being the interest earned by the investor. The interest rates are at around 3-5%.

Buying T-Bills or Treasury Bills

The Government pays you back with interest at the end of the maturity term. More specifically,

1. T-Bills have face value.

You buy T-Bills at a discount called the discount rate.
When the T-Bills matures you get your investment back plus the discounted rate.

Face value = $100-$10,000 unlimited amount

Discount rate = 3% -5%

Maturity term = 4, 13, 17, 26, or 52 weeks.

Example, if you pay $10,000 (T-Bill) - 3% (gov discount rate) = $9700 (is what you pay).

After the maturity stage you’ll get back your, $9700 + $300 (3% Interest on Discounted rate) = $10,000 (what gov pays back).

Treasury Direct Marketable Sercurities

The Advantages of Treasury Bills

1. Virtually zero risk of losing in initial investment.

Government backed

2. Exempt from local and state taxes

Applicable no matter where you live in the US

3. Can be bought in smaller amounts than many other investments.

More assessable to retail investors

The Disadvantages of Treasury Bills

1. Has a lower rate of return than some other investments.

2. It’s not exempt from federal tax.

Need to report interest income on federal tax return

3. Treasury bills are bought VIA bidding through an auction process.

Can be competitive or non-competitive
Might not get what you want

Treasury Direct Treasury Bills Data

3 main ways to invest in treasury bills

1. Treasury direct

Online platform with debt auction to buy, hold, and redeem treasury debt securities.
Run by US Department of treasury they’re more secure and reliable.
Takes 10 minutes to open an account. If you don’t have a brokerage account.
if you’re looking to hold treasuries until maturity.
if you want a safe virtually risk free platform for your investments.
if you want full ownership and control over your treasuries.

2. Secondary Markets through online brokers

Vanguard, Charles Schwab, Fidelity, TD Ameritrade
Offer new issue treasuries without fees
if you want to buy and sell your securities before maturity.
if you want to use your owned treasuries towards buying power of other securities.
if you want to purchase from a higher pool of treasuries that are being sold right before maturity.
if you don’t want to open a treasury direct account with the government.

3. ETFs (exchange-traded funds)

Invest in a whole fund of short term, maturity, treasuries
Can be found through online brokers
if you want to trade treasuries with more liquidity.
if you want to invest in a broader treasury market, then just one or a few treasuries alone.

Treasury Direct Auctions of Treasury Bills (T-Bills)