Treasury Bills vs. bonds
Treasury Bills are a type of short-term debt security issued by the US government, while bonds are a long-term debt security issued by governments and corporations.
According to Finder’s most recent Consumer Confidence Index survey, 39% of Americans are investing more conservatively compared to the prior six months. This number is up from 33% in July, when we last asked this question, and is unsurprising given the lingering uncertainty in the markets. That, and the Federal Reserve’s push to tame inflation by raising interest rates has made some conservative investments a competitive place to park your money.
Treasury Bills, one of the Treasury’s five types of marketable securities, are considered some of the safest investments available, but that safety comes at a cost. Here’s what to know before adding them to your portfolio.
A Treasury Bill (T-Bill) is a type of short-term US debt security with a maturity of one year or less. They’re one of five types of Treasury marketable securities, which are securities that can be transferred or sold before they reach the end of their term. The US government sells T-Bills to raise money to help fund its debt and its day-to-day operations. When you buy a T-Bill, you are giving the US government a short-term loan. In return, you receive an interest payment when the bill matures. The Treasury Department sells T-Bills in $100 increments with a maximum purchase of $10 million in noncompetitive bids.
T-Bills are widely regarded as a safe investment, as they’re backed by the full faith and credit of the US government.
Term options | 4, 8, 13, 17, 26 and 52 weeks |
Interest rate | Fixed at auction |
Interest paid | At maturity |
Minimum purchase | $100 to $1,000 |
Maximum purchase | $10 million in noncompetitive bids |
Taxes |
|
You can buy T-Bills one of two ways:
Once you have purchased Treasury Bills through TreasuryDirect, you can access and manage them through your account. You can also choose to reinvest or redeem your holdings when they mature, or sell them before they mature.
While the exact process will vary slightly, the following are general steps to buy T-Bills through a broker:
In addition to purchasing T-Bills directly from the Treasury Department or via a bank or broker, it’s possible to gain exposure to the price and yield performance of T-Bills through exchange-traded funds (ETFs). Some T-Bill ETFs include:
Treasury Bills, Treasury Notes (T-Notes) and Treasury Bonds (T-Bonds) are all types of fixed-term debt products issued by the US Treasury Department. The main difference between these debt instruments is the time to maturity and when interest is paid.
Treasury Bills are a type of short-term debt security issued by the US government, while bonds are a long-term debt security issued by governments and corporations.
With a low risk of default, low investment minimum and short time horizon, T-Bills may be an appealing place to invest. In an environment where shorter-term yields are higher than longer-term yields, T-Bills may be even more attractive. But they don’t come without disadvantages. Periods of rising interest rates may make existing T-Bills less attractive, but this won’t matter if you plan to hold the bill until maturity.
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