What Are Treasury Bills (T-Bills)? Complete Guide 2026

Last updated: April 2026  ·  10 min read  ·  Beginner friendly

Treasury Bills (T-Bills) are short-term debt securities issued by the U.S. government. You buy them at a discount, hold them for weeks to a year, and receive the full face value at maturity. The difference is your profit — guaranteed by the U.S. government.

This complete guide explains everything you need to know about T-Bills — how they work, how much they pay, how they are taxed, and exactly how to buy them — whether you're a first-time investor or just comparing options for idle cash.

What Are Treasury Bills?

Treasury Bills are short-term U.S. government securities with maturities ranging from 4 weeks to 52 weeks. They are issued by the U.S. Department of the Treasury to fund government operations and are backed by the full faith and credit of the United States — meaning the government has never defaulted on them.

Unlike bonds or savings accounts, T-Bills do not pay periodic interest. Instead, they are sold at a discount to their face value. At maturity, you receive the full face value. The difference between what you paid and what you receive is your return.

How Do T-Bills Work?

T-Bills are one of the simplest investments available. Here is exactly how the process works:

1. You choose a face value and duration — for example, $10,000 for 26 weeks (182 days).
2. You buy at a discount — based on the current discount rate (say 5%), you pay less than $10,000 at purchase. The government keeps the difference upfront.
3. You hold the T-Bill until maturity — no action needed. The T-Bill sits in your TreasuryDirect or brokerage account.
4. You receive the full face value — at maturity, $10,000 is deposited into your linked bank account automatically.

Types of T-Bills by Duration

The U.S. Treasury offers T-Bills in six standard durations. Each has its own auction schedule and typical yield profile. The right duration depends on when you need your money back and the current interest rate environment.

Choosing between these durations involves more than just picking the longest one. Rate direction, your liquidity needs, and your reinvestment plan all affect which duration works best for your situation.

How Much Return Do T-Bills Give?

T-Bill returns are determined by auction results and change with market conditions. Returns are not fixed — each auction produces a slightly different rate based on investor demand and Federal Reserve policy.

In 2023–2024, T-Bill rates reached multi-decade highs, ranging between 4.5% and 5.5% annually. As of early 2026, rates have moderated but remain competitive with high-yield savings accounts and CDs.

Note: Annualized yield is always slightly higher than the stated discount rate because the yield is calculated on the lower purchase price, not the full face value.

How T-Bill Auctions Work

T-Bills are sold through competitive auctions held by the U.S. Treasury. Understanding how auctions work helps you know when to buy and what rate you will get.

Two Types of Bids

• Non-competitive bid — You agree to accept whatever rate the auction produces. You are guaranteed to receive your full requested amount. This is what most individual investors use on TreasuryDirect.gov.
• Competitive bid — You specify the discount rate you want. If the auction clears at a lower rate, your bid may be rejected. Used mainly by banks and institutional investors.

How the Rate Is Set

The Treasury collects all bids and fills them from lowest to highest discount rate until the full issue amount is sold. The highest accepted rate becomes the stop-out rate — the rate all non-competitive bidders receive.

Auction Schedule

4-week and 8-week T-Bills are auctioned every Tuesday. 13-week and 26-week T-Bills are auctioned every Monday. 17-week T-Bills are auctioned every Wednesday. 52-week T-Bills are auctioned every four weeks. Results are published on TreasuryDirect.gov the same day.

Are Treasury Bills Safe?

T-Bills are considered the safest investment in the world. They are backed by the U.S. government — the same entity that controls the U.S. dollar and has never defaulted on its debt obligations.

• No default risk — the U.S. government guarantees full repayment at maturity
• No market risk — if held to maturity, you receive exactly what was promised
• No FDIC limit — unlike bank accounts, there is no $250,000 insurance cap on T-Bills
• Globally trusted — central banks and governments worldwide hold U.S. T-Bills as reserves

How Are T-Bills Taxed?

T-Bills have a significant tax advantage over bank products like CDs and savings accounts.

This exemption from state tax is especially valuable in high-tax states like California (13.3%), New York (10.9%), and New Jersey (10.75%). In these states, a T-Bill at 5% can easily beat a CD at 5.5% after all taxes are accounted for.

When Do You Pay Tax on T-Bills?

T-Bill interest is reported on IRS Form 1099-INT and is taxable in the year the T-Bill matures — not when you buy it. You report it on your federal income tax return. Your brokerage or TreasuryDirect will send you a 1099-INT after year-end.

What Happens When a T-Bill Matures?

When your T-Bill reaches its maturity date, one of two things happens automatically:

Option 1 — Cash is deposited to your bank account

If you set up your T-Bill to mature to cash, the full face value is transferred to your linked bank account within one business day of maturity. No action is required on your part.

Option 2 — Automatic reinvestment (rollover)

On TreasuryDirect, you can schedule your T-Bill to automatically reinvest into a new T-Bill of the same duration at the next available auction. This is called rolling over and is how most T-Bill investors manage their holdings with minimal effort.

How to Buy Treasury Bills — Step by Step

There are two main ways to buy T-Bills. Here is exactly how each works:

Method 1 — TreasuryDirect.gov (Direct from Government)

1. Go to TreasuryDirect.gov and create a free account.
2. Link your U.S. bank account for funding and receiving payments.
3. Click "BuyDirect" and select Treasury Bills.
4. Choose your desired duration (4-week, 8-week, 13-week, 17-week, 26-week, or 52-week).
5. Enter your purchase amount (minimum $100, in $100 increments).
6. Submit a non-competitive bid — you accept the auction rate.
7. Funds are debited from your bank on the auction settlement date.
8. At maturity, the full face value is deposited back to your bank.

Method 2 — Through a Brokerage (Fidelity, Schwab, Vanguard)

1. Log into your existing brokerage account (Fidelity, Schwab, Vanguard, etc.).
2. Search for "Treasury Bills" under Fixed Income or Bonds.
3. Filter by duration — select the maturity date closest to your goal.
4. Enter the face value amount you want to purchase.
5. Place the order — most brokerages charge $0 commission on new-issue T-Bills.
6. The T-Bill appears in your account. At maturity, cash is credited automatically.

What is a T-Bill Ladder?

A T-Bill ladder is a strategy where you split your money across multiple T-Bills with different maturity dates so that one comes due every few weeks. This gives you regular access to cash while the rest of your money keeps earning T-Bill yields.

Example of a simple 4-rung ladder with $40,000:

• $10,000 in a 4-week T-Bill — available again in 28 days
• $10,000 in a 13-week T-Bill — available again in 91 days
• $10,000 in a 26-week T-Bill — available again in 182 days
• $10,000 in a 52-week T-Bill — available again in 364 days

As each T-Bill matures, you reinvest into a new T-Bill of your chosen target duration. Over time, you build a portfolio where one T-Bill matures regularly — giving you liquidity without sacrificing yield on the rest of your money.

For a full breakdown of ladder strategies, timing, dollar projections, and how to build one step by step, see our dedicated guide: T-Bill Ladder Strategy — Full Guide →

T-Bills vs CDs vs Savings Accounts vs Money Market

*Money market funds that hold T-Bills may pass through the state tax exemption — check your fund's prospectus.

Are T-Bills Safe in a Recession?

Yes — T-Bills are widely considered one of the best places to hold money during a recession or market downturn. Here is why:

• Government guarantee: T-Bills are backed by the U.S. government, which can print dollars to repay its obligations. There is no realistic default scenario for short-term U.S. debt.
• Flight to safety: During recessions, investors move money out of stocks into T-Bills. This increased demand actually pushes T-Bill prices up (yields down), meaning T-Bill holders see their value preserved or increase.
• Short duration: Because T-Bills mature in less than a year, you are never locked in for long. Even in rapidly changing rate environments, your exposure is limited.
• No correlation with stocks: T-Bills do not fall when stock markets crash — they often rise as a safe haven.

Pros and Cons of Treasury Bills

Should You Invest in T-Bills?

T-Bills are a good fit if you:

• Have cash sitting idle that you won't need for weeks or months
• Want the absolute safest option with predictable returns
• Are in a high state-tax bracket and want to reduce your tax bill
• Have more than $250,000 in cash (exceeds FDIC limits at banks)
• Want to park an emergency fund while still earning a competitive yield

T-Bills may not be right if you:

• Need instant access to your money at any time
• Are investing for long-term growth (stocks outperform over decades)
• Live in a state with no income tax — the tax advantage disappears
• Want a fixed rate locked in for more than 1 year (consider I-Bonds or T-Notes)

Once you decide T-Bills are right for you, the next step is choosing the right duration. That decision depends on your timeline, whether rates are rising or falling, and how often you want to reinvest: Best T-Bill Duration 2026 — Which Should You Choose? →

Frequently Asked Questions About Treasury Bills