Treasury Bill (T-Bill)
Quick Definition
A short-term U.S. government debt security with a maturity of one year or less, sold at a discount and redeemed at face value.
Key Takeaways
- Maturities of 4 to 52 weeks — the shortest Treasury securities
- Sold at a discount, redeemed at par — no coupon payments
- Considered the risk-free rate benchmark in financial models
- Extremely liquid and used globally for cash management
What Is Treasury Bill (T-Bill)?
Treasury bills (T-bills) are short-term debt obligations issued by the U.S. Department of the Treasury with maturities of 4, 8, 13, 17, 26, or 52 weeks. Unlike longer-term Treasuries, T-bills do not pay periodic coupon interest. Instead, they are sold at a discount to their face value and the investor receives the full face value at maturity — the difference represents the return. T-bills are considered the closest proxy to a "risk-free" investment due to the full faith and credit backing of the U.S. government and their short duration. They serve as the benchmark for the risk-free rate in financial models like CAPM, are highly liquid, and are used extensively by money market funds, corporations, and central banks for cash management.
Treasury Bill (T-Bill) Example
- 1A 26-week T-bill with $10,000 face value might sell for $9,750 — the $250 difference is the investor's return (approximately 5.1% annualized)
- 2Money market funds hold trillions in T-bills as their primary short-term, low-risk investment
Related Terms
Treasury Note (T-Note)
A medium-term U.S. government debt security with a maturity of 2 to 10 years, paying semiannual coupon interest.
Treasury Bond (T-Bond)
A long-term U.S. government debt security with a maturity of 20 or 30 years, paying semiannual coupon interest.
Bond Discount
When a bond trades below its face (par) value, typically because its coupon rate is lower than prevailing market interest rates.
Par Value
The face value of a bond, typically $1,000, representing the amount repaid to the bondholder at maturity.
Bond
A fixed-income debt security where investors loan money to an issuer in exchange for regular interest payments and return of principal at maturity.
Yield Curve
A graphical representation of interest rates across different maturities for bonds of similar credit quality, typically U.S. Treasuries.
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