Learn About Buying Treasury Bills Today

What Treasury Bills Actually Are and How They Work

Treasury bills—often called T-bills—are short-term loans you can make to the federal government. When you buy a Treasury bill, you're lending money to the U.S. Department of the Treasury, and in return, the government pays you back with interest after a set period of time. This is different from stocks, which represent ownership in a company, or bonds, which are longer-term loans. T-bills are among the shortest-term government securities available.

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The way Treasury bills work is straightforward: the government needs to borrow money to fund its operations, so it issues these bills and sells them to investors. You purchase a T-bill at a discount—meaning you pay less than its face value. When the bill matures (reaches its end date), the government pays you the full face value. The difference between what you paid and what you receive is your profit, and that's essentially your interest earnings. For example, you might pay $9,800 for a $10,000 T-bill, and when it matures, you receive the full $10,000, giving you a $200 return.

Treasury bills come in different maturity lengths: 4 weeks, 8 weeks, 13 weeks, 26 weeks, and 52 weeks. The longer you lend money to the government, the higher your return typically is, though this isn't always the case. The 13-week and 26-week options are the most commonly purchased by individual investors because they offer a middle ground between short-term cash holdings and longer-term investments.

One key characteristic that makes T-bills different from many other investments is their safety level. Because they're backed by the U.S. government and its ability to tax citizens and collect revenue, they're considered one of the lowest-risk investments available. This safety comes with a trade-off: the returns are typically lower than what you'd make from stocks or corporate bonds.

Takeaway: Think of Treasury bills as a way to lend money to the government for a short period and earn a small return in the process. The government uses your money, and when the time period ends, you get your money back plus interest.

Understanding Current Treasury Bill Rates and Market Conditions

Treasury bill rates fluctuate based on supply and demand in the market, inflation expectations, and decisions made by the Federal Reserve. As of late 2024, Treasury bill rates have settled into a range that reflects the Federal Reserve's interest rate policies. For context, in 2023 and early 2024, rates climbed to levels not seen in decades—some 13-week T-bills were offering returns around 5% or higher. These rates have since adjusted as economic conditions have evolved.

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The rates you see quoted for T-bills are often expressed in different ways, which can be confusing. The "discount yield" is one common method, while the "investment yield" or "bond equivalent yield" is another. These different calculations can make the same T-bill appear to have different rates depending on which method you're using. For example, a T-bill quoted at a 5% discount yield might have an investment yield closer to 5.1%. Understanding this distinction matters when comparing your potential returns.

Current market conditions affect how much you'll earn from T-bills. When inflation is high, the Federal Reserve often raises interest rates, which tends to make new T-bill offerings more attractive. When inflation cools down and the economy slows, rates typically fall. This means that if you bought T-bills six months ago at one rate, new T-bills being issued today might offer a different return. There's no way to lock in today's rate for future purchases—each auction sets a new rate based on market conditions at that time.

You can find current Treasury bill rates on the U.S. Department of the Treasury website (treasurydirect.gov), which provides information about upcoming auctions and historical rates. Major financial websites like Bloomberg, MarketWatch, and your brokerage account also display current rates. Rates change constantly as new auctions occur—the Treasury conducts T-bill auctions regularly throughout the week.

Takeaway: Check current rates before deciding to purchase, understand that rates vary by maturity length, and remember that rates from past months won't tell you what you'll earn if you buy today. Use official Treasury sources or your brokerage for the most current information.

Two Main Ways to Buy Treasury Bills: Direct and Through a Broker

You have two primary paths to purchase Treasury bills: buying directly from the U.S. Treasury through TreasuryDirect, or purchasing through a brokerage account like Fidelity, Charles Schwab, Vanguard, or other financial institutions. Each method has different procedures, fees, and considerations.

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Buying directly through TreasuryDirect (treasurydirect.gov) is the most straightforward path if you want to avoid broker fees. To use TreasuryDirect, you'll need to create an account, verify your identity, and link a bank account. Once you're set up, you can place bids during Treasury auctions. With TreasuryDirect, you specify how much you want to bid for (in minimum amounts of $100), and if the auction occurs, your money is transferred from your bank account. The account holds your T-bills electronically, and when they mature, the proceeds automatically go back to your linked bank account. One important note: TreasuryDirect can be slower and less user-friendly than brokerage platforms, and you cannot sell your T-bills before maturity through TreasuryDirect—you must hold them until they mature.

Buying through a brokerage means working with an investment firm that handles the purchase on your behalf. When you buy T-bills through a broker, you're often not buying directly from an auction—instead, you're purchasing them from other investors or the broker's inventory in what's called the secondary market. Many brokerages now offer T-bills with no transaction fees, making this a competitive option. A significant advantage of buying through a broker is flexibility: you can sell your T-bills before maturity if you need access to your cash. Brokers also typically provide easier tracking and reporting for tax purposes.

The comparison matters based on your situation. If you want the absolute lowest cost and plan to hold T-bills until maturity, TreasuryDirect makes sense. If you might need to sell before maturity, want a more familiar investment platform, or prefer the user experience of a traditional brokerage, that path may suit you better. Some investors use both—maintaining a TreasuryDirect account for long-term holdings while using a brokerage for more active trading of shorter positions.

Takeaway: Decide whether you'll definitely hold until maturity (TreasuryDirect works well) or might need flexibility to sell early (a broker is better). Both options are legitimate; the right choice depends on your specific needs and comfort level with the platforms.

The Step-by-Step Process for Purchasing Through TreasuryDirect

If you decide to purchase Treasury bills directly from the government through TreasuryDirect, here's what the process involves. Start by visiting treasurydirect.gov and creating an account. You'll need to provide personal information, create a username and password, and verify your identity. The site uses electronic verification, and most new accounts are confirmed within minutes. You'll also need to provide your Social Security number and link a U.S. bank account—this is where money will be withdrawn for your purchase and where proceeds will be deposited when your T-bills mature.

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Once your account is active and verified, you can view upcoming Treasury auctions. The Treasury maintains a schedule of auction dates, and you can see which securities are being auctioned and when. T-bills are auctioned multiple times per week, so you have frequent opportunities to purchase. When you find an auction you want to participate in, you'll place a bid. You have two bidding options: a "competitive bid" or a "noncompetitive bid." Most individual investors use noncompetitive bids because they're simpler—with a noncompetitive bid, you're saying "I'll pay whatever the auction determines the price should be," and your order is nearly guaranteed to be filled at the average price from that auction. A competitive bid means you're specifying the exact price you're willing to pay, which gives you more control but also means your bid might not be filled if the auction clears at a higher price.

After you place your bid during the auction window, you'll receive a confirmation. On