What are Treasury Bills?

Treasury bills, or T-bills, are short-term securities issued by the U.S. Treasury, maturing in one year or less. They are sold at a discount and are backed by the full faith and credit of the U.S. government.

---

Understanding Treasury Bills

Treasury bills are highly liquid, low-risk securities issued by the U.S. government with maturities of one year or less. Instead of earning interest, T-bills are sold at a discount to their face value. They are available in denominations as low as $100, with a purchase limit of $5 million per auction. T-bills mature in 4, 8, 13, 26, or 52 weeks, and they offer lower yields compared to longer-term Treasury securities due to their short duration and quick liquidity.

---

How do Treasury bills work?

Treasury bills are sold at a discount, meaning investors pay less than the face value and receive the full amount at maturity, raising short-term capital for the government. T-bills can also be sold on the secondary market before maturity. Redemption is automatic through TreasuryDirect.com, with an option to reinvest in new T-bills.

---

What influences T-bill prices?

Treasury bill prices are influenced by various factors, including Federal Reserve policy, market conditions, time to maturity, inflation rates, investor risk tolerance, and supply/demand dynamics. Competitive bidding also affects prices in non-competitive auctions, where even the sentiment of a significant investor can impact pricing. Generally, T-bill prices align with the Federal Reserve's interest rate, but if rates rise, making other investments more attractive, reduced demand for T-bills can exert more influence on their pricing than the Fed Funds Rate itself.