Treasury Bills Definition

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on January 13, 2021

What is a Treasury Bill?

US Treasury Bills, commonly known as T Bills, are certificates of debt issued by the United States government that have a maturity date of one year or less. 

Because the lifespan of a T Bill is so short, they do not incur regular interest payments. 

Instead, the government sells Treasury Bills at a discount from their face value and pays the full face amount upon maturity. 

The difference between the discounted sale price and the face value the Bill acts as the interest paid to investors for owning a Treasury Bill. 

For example, if a 26-week, $1000 Treasury Bill is discounted to $980, then the owner of the Bill will stand to make a $20 profit. $20 is 2.04% of $980, but 4.08% when prorated annually.

T Bills normally are sold in denominations of $1000 all the way up to 5 million dollars. 

In contrast with other U.S. Treasury Notes and Bonds, Common T Bill maturities are 4, 8, 13, 26, and 52 weeks. 

The longer the maturity date, the higher return the investment will have.

Treasury Bills (T-Bill) Rates

Because Treasury Bills are backed by the full faith and credit of the US government, T-Bills are considered to be one of the safest investment vehicles available. 

Because of the guarantee of profit, T Bills usually offer lower yields than equivalently priced investments, such as traditional bonds. 

Treasury Bill Definition FAQs

T-Bills stands for a Treasury Bill.
US Treasury Bills, commonly known as T Bills, are certificates of debt issued by the United States government that have a maturity date of one year or less.
Because the lifespan of a T Bill is so short, they do not incur regular interest payments.
Because Treasury Bills are backed by the full faith and credit of the US government, T-Bills are considered to be one of the safest investment vehicles available.