How do I buy a T bill?
You can only buy T-bills in electronic form, either from a brokerage firm or directly from the government at TreasuryDirect.gov. (You can also buy Series I savings bonds through TreasuryDirect.gov.)
You can buy (bid for) Treasury marketable securities through: your TreasuryDirect account — non-competitive bids only. a bank, broker, or dealer — competitive and non-competitive bids.
Bills are sold in increments of $100. The minimum purchase is $100. All bills except 52-week bills and cash management bills are auctioned every week.
You can buy them from the government directly, and many buy them through a brokerage, retirement or bank account. Treasury owners pay federal taxes on the investment interest earned but no state or local taxes.
Basic Info. 1 Year Treasury Rate is at 5.17%, compared to 5.18% the previous market day and 4.77% last year. This is higher than the long term average of 2.95%. The 1 Year Treasury Rate is the yield received for investing in a US government issued treasury security that has a maturity of 1 year.
To calculate the price, take 180 days and multiply by 1.5 to get 270. Then, divide by 360 to get 0.75, and subtract 100 minus 0.75. The answer is 99.25. Because you're buying a $1,000 Treasury bill instead of one for $100, multiply 99.25 by 10 to get the final price of $992.50.
Key Takeaways
Interest from Treasury bills (T-bills) is subject to federal income taxes but not state or local taxes. The interest income received in a year is recorded on Form 1099-INT. Investors can opt to have up to 50% of their Treasury bills' interest earnings automatically withheld.
T-bills pay a fixed rate of interest, which can provide a stable income. However, if interest rates rise, existing T-bills fall out of favor since their return is less than the market. T-bills have interest rate risk, which means there is a risk that existing bondholders might lose out on higher rates in the future.
Like Treasury bonds and notes, T-bills have no default risk since they're backed by the U.S. government.
T-bills sell in increments of $100 up to a maximum of $10 million, and you can buy them directly from the government through its TreasuryDirect website, or through a brokerage, bank or self-directed retirement account, like a Roth IRA.
Why not to buy Treasury bills?
Taxes: Treasury bills are exempt from state and local taxes but still subject to federal income taxes. That makes them less attractive holdings for taxable accounts. Investors in higher tax brackets might want to consider short-term municipal securities instead.
Treasury bonds—also called T-bonds—are long-term debt obligations that mature in terms of 20 or 30 years. They're essentially the opposite of T-bills as they're the longest-term and typically the highest-yielding among T-bills, T-bonds, and Treasury notes.
Differences between investing in CDs and T-bills
The amount you save on taxes will likely result in a higher payout from a T-bill than a CD. Another benefit of T-bills is their liquidity. You can buy and sell them on a secondary market.
6 Month Treasury Rate is at 5.39%, compared to 5.39% the previous market day and 5.06% last year. This is higher than the long term average of 2.83%. The 6 Month Treasury Bill Rate is the yield received for investing in a US government issued treasury security that has a maturity of 6 months.
3 Month Treasury Bill Rate is at 5.25%, compared to 5.25% the previous market day and 5.01% last year. This is higher than the long term average of 4.19%.
T-Bill Tax Considerations
The interest income that you may receive from investing in a treasury bill is exempt from any state or local income taxes, regardless of the state where you file your taxes. However, you will need to report interest income from these investments on your federal tax return.
The minimum amount that you can purchase of any given Treasury Bill, Note, Bond, TIPS, or FRNs is $100.
| Compare the Best Online Brokers | ||
|---|---|---|
| Fidelity Investments | Best Overall and Best for Low Costs | 4.8 |
| TD Ameritrade | Best for Beginners and Best Mobile App | 4.5 |
| Tastytrade | Best for Options | 3.8 |
| Interactive Brokers | Best for Advanced Traders and Best for International Trading | 4.6 |
We report annually to you and the IRS all interest earned on Treasury bills and all semiannual interest payments on Treasury notes and bonds. Specifically, we provide: A 1099 – I N T reporting the total amount of interest earned and the amount withheld and paid to the IRS for the previous calendar year.
What happens when a treasury bill is reinvested?
Bills can be scheduled for reinvestment for up to two years; other eligible Treasury marketable securities can be scheduled to reinvest one time. When your bill matures, the proceeds will be reinvested or used to purchase the next available security of the same type and term as the original purchase.
While interest rates and inflation can affect Treasury bill rates, they're generally considered a lower-risk (but lower-reward) investment than other debt securities. Treasury bills are backed by the full faith and credit of the U.S. government. If held to maturity, T-bills are considered virtually risk-free.
As recently as two years ago, the yearly return for T-Bills was effectively zero. It was so low that a $10,000 T-Bill would have paid out $1 in profit over a full year. Interest rates, which were effectively zero at times in 2021, are now well over 5%.
Maturity length: Treasury bills have limited term options; terms range from four to 52 weeks. With CDs, you have more options. CD terms can be a few months or several years. A CD with a longer term allows you to lock in a certain APY for a lengthy period.
But while they are lauded for their security and reliability, potential drawbacks such as interest rate risk, low returns and inflation risk must be carefully considered. If you're interested in investing in Treasury bonds or have other questions about your portfolio, consider speaking with a financial advisor.
