Treasury Bill
BeginnerA Treasury bill is a short-term debt security issued by the US government, maturing in one year or less. It is sold at a discount and repaid at its full face value.
Treasury bills, often called T-bills, do not pay regular interest. Instead, investors buy them for less than their face value and receive the full face value at maturity. The difference is the investor's return.
For example, an investor might buy a 26-week T-bill with a face value of 1,000 for 980. At maturity, they receive 1,000, earning 20, or about 2% over six months.
T-bills are issued with maturities of a few weeks up to one year. Because they are backed by the US government and mature quickly, they are considered one of the safest and most liquid investments in the world. Their yields are often used as a measure of the short-term risk-free rate.
Investors, companies, banks and money market funds use T-bills to hold cash safely while earning some interest. Many other governments issue similar short-term securities under different names, such as treasury bills in the United Kingdom and India.
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