Treasury Bills Explained: Yield, Maturities and How to Buy

A treasury bill is the simplest deal in finance: you hand the government less than $10,000 today and it hands you exactly $10,000 on a fixed date weeks or months from now. The gap is your interest — known in advance, backed by the full faith of the government, and paid like clockwork. No coupons, no price surprises if you hold to the end.

This is treasury bills explained the way a desk would explain it to you: how the discount yield actually works (the part every beginner trips over), what the current maturities pay, how to buy one in the US and the UK, and when a T-bill beats parking the same cash in a money market fund. If short-dated, rate-sensitive instruments are your thing, our structured ETF and index investing course covers how these building blocks sit inside a real portfolio.

What is a treasury bill, in one paragraph?

A treasury bill is a short-term government debt security that matures in one year or less and pays no periodic interest. Instead of a coupon, you buy it at a discount to its face value and receive the full face value at maturity. Buy a $10,000 bill for $9,896 and the $104 you collect at the end is your interest. Because the repayment is fixed and government-backed, the only real question is the yield you lock in on the day you buy.

That structure — pay less now, collect face later — is why a bill is called a discount instrument. It is the same idea whether the bill is issued by the US Treasury or the UK Debt Management Office.

How does the yield on a treasury bill actually work?

Here is where most beginners get confused, because every bill is quoted with two different yield numbers. Get these straight and the rest is easy.

The discount rate is calculated on the bill's face value using a 360-day year. It is the number used to set the purchase price, and it is always slightly lower than the yield you actually earn. The investment rate (also called the bond-equivalent yield) is calculated on what you actually paid, using a 365-day year. That second number is the one you line up against a savings account or a certificate of deposit, because it answers the real question: what return am I earning on my money?

Walk through a live example using the late-September 2026 13-week auction, which cleared at a 4.110% discount rate and a 4.211% investment rate:

• Price = $10,000 × (1 − 0.0411 × 91/360) = $9,896.11
• At maturity you receive $10,000 — a profit of $103.89
• Return on what you paid, annualized: 103.89 / 9,896.11 × 365/91 = 4.21%

Notice the 4.21% matches the published investment rate exactly, while the 4.110% discount rate understates what you earned. Always compare the investment rate, never the discount rate, when you are shopping a bill against other cash options.

Yields also differ by maturity. At the late-September 2026 auctions, the curve sloped up — longer bills paid more:

What this means for you: when the curve slopes up like this, a longer bill locks a higher rate — but only commit cash you genuinely will not need until that bill matures, because getting out early is where the cost hides.

Treasury bill maturities: from 4 weeks to 1 year

The US Treasury issues bills in six standard maturities: 4, 8, 13, 17, 26 and 52 weeks. Shorter bills reset quickly to wherever rates move next; longer bills lock today's rate for up to a year. That single choice — how long to lock — is the main decision a bill buyer makes.

Think of it as a spectrum of commitment. A 4-week bill is cash you want to keep near the front door; a 52-week bill is cash you are comfortable fixing for a full year to capture the higher rate. Many investors stagger several maturities so a slice matures every few weeks, the same logic behind a bond ladder: you keep reinvesting at prevailing rates instead of betting everything on one date.

Bills sit at the shortest, safest end of the government-debt range. Move further out in time and you reach notes and longer-dated government bonds, which pay coupons and swing far more in price when rates change. A bill's defining feature is that its price barely moves, precisely because it matures so soon.

How to buy treasury bills in the US

You have two routes: directly from the government via TreasuryDirect, or through a brokerage account. The direct route is the cheapest and the most beginner-friendly for buy-and-hold cash.

Source: U.S. TreasuryDirect, 2026.

The brokerage route adds one feature that matters: access to competitive bids and, crucially, a secondary market to sell before maturity. TreasuryDirect gives you non-competitive bids only and no early exit. For cash you are certain to leave untouched, TreasuryDirect is simplest; for cash you might need to free up, pay for the flexibility of a broker.

How UK investors buy treasury bills (and gilts)

The UK structure looks similar on the surface and very different underneath. The Debt Management Office (DMO) sells Treasury bills through weekly tenders in 1-month (about 28 days), 3-month (about 91 days) and 6-month (about 182 days) maturities. Like US bills, they are zero-coupon: bought below the £100 redemption value, with the yield set by each tender and not fixed until the bill is issued.

The catch is access. Buying directly at a DMO tender means going through a Treasury Bill Primary Participant and committing a minimum of £500,000 nominal — an institutional size, not a retail one. In practice, UK individuals buy through an investment platform that passes the order into the tender. Reported 2026 platform minimums sit around £1,000 on the larger brokers.

For most UK retail investors the smoother path to short-dated government exposure is a money market fund or a short-gilt fund rather than individual bills. The decision logic is the same one that governs money market funds versus holding the instruments yourself: convenience and liquidity against control and a fixed maturity date.

Treasury bills vs a money market fund: which parks cash better?

This is the real-world question, because the money market fund is where most idle cash already sits — nearly $8 trillion of it in 2026. Both are low-risk homes for cash, but they behave differently, and the right pick depends on when you need the money and where you pay tax.

Source: U.S. Treasury auction data and market commentary, 2026; money market fund assets per Crane Data, 2026. Yields are indicative and move frequently.

The decision rule: if you know the date you need the cash — a tax bill in six months, a house deposit on a set completion date — a T-bill that matures around then is often the better after-tax deal, especially in a high-tax state. If the cash is a general reserve you might dip into at any time, the money market fund's daily liquidity is worth more than the extra few basis points. Many investors use both: a money market fund for the day-to-day buffer, and a short ladder of bills for the money earmarked for a date they can already see on the calendar. You do not have to choose one tool for every dollar.

Mistakes to avoid with treasury bills

• Comparing the discount rate to a savings rate. Always use the investment rate — the discount rate understates your true return.
• Buying a 52-week bill with cash you might need in two months. Selling early forfeits the "no price risk" advantage and needs a broker, not TreasuryDirect.
• Ignoring the state-tax exemption. In a high-tax state the after-tax yield on a bill can beat a higher-headline savings account.
• Assuming the yield is guaranteed before the auction. You lock the rate only once the auction clears, not when you place the order.

Frequently asked questions

Investing involves risk, and yields and prices change. This article is educational content, not investment or tax advice; confirm current rates and your own tax position before acting.