Treasury T Bills
How Treasury bills are sold and priced, the terms available, the true yield behind the discount rate, how they're taxed, and a calculator.
Treasury T bills price and yield calculator
How Treasury T bills work
Treasury bills are short-term government debt sold at a discount: you pay less than face value and get the full face value at maturity, and the difference is your interest. TreasuryDirect sells bills in 4, 6, 8, 13, 17, 26 and 52-week terms, from $100 in $100 increments, up to $10 million in a non-competitive bid. Most terms auction weekly; 52-week bills every four weeks.
Discount rate vs investment yield
The auction's discount rate is quoted on face value over a 360-day year, so it understates what you earn. The investment yield divides the interest by the price you paid over 365 days. Example: $10,000 of 26-week bills at a 4.00% discount cost $9,797.78 and pay $202.22, an investment yield of about 4.14%.
Taxes
Bill interest is taxed federally in the year the bill matures (Form 1099-INT) but not by states or localities, which gives bills an edge over CDs and savings accounts in high-tax states. For longer terms see ten year treasury yield.
Common questions
What terms do Treasury bills come in?
4, 6, 8, 13, 17, 26 and 52 weeks.
What is the minimum to buy a T-bill?
$100, in $100 increments.
Are T-bills taxed by states?
No, the interest is exempt from state and local income tax.
Sources
More savings and interest calculators: ScholarShare 529 · Virginia529 · 529 Calculator
Related
General information, not financial, tax or legal advice. Check important numbers with the official source before acting on them.