Treasury Bills — TreasuryDirect (2024)

FAQs

Why am I losing money on Treasury bills? ›

T-bills pay a fixed rate of interest, which can provide a stable income. However, if interest rates rise, existing T-bills fall out of favor since their return is less than the market. T-bills have interest rate risk, which means there is a risk that existing bondholders might lose out on higher rates in the future.

A Treasury bill, or T-bill, is a short-term debt obligation backed by the U.S. Treasury Department. It's one of the safest places you can save your cash, as it's backed by the full faith and credit of the government. T-bills are auctioned off at a discount and then redeemed at maturity for the full amount.

Securities purchased through TreasuryDirect cannot be sold in the secondary market before they mature. This lack of liquidity could be a disadvantage for investors who may need to access their investment capital before the securities' maturity.

3 Month Treasury Bill Rate is at 5.25%, compared to 5.25% the previous market day and 5.12% last year. This is higher than the long term average of 4.19%. The 3 Month Treasury Bill Rate is the yield received for investing in a government issued treasury security that has a maturity of 3 months.

Taxes: Treasury bills are exempt from state and local taxes but still subject to federal income taxes. That makes them less attractive holdings for taxable accounts. Investors in higher tax brackets might want to consider short-term municipal securities instead.

This means that investors looking for high returns may not find T-bills attractive. Since T-bills have fixed interest rates, inflation can erode the purchasing power of the returns earned from these investments. This means that investors may need help to keep up with inflation, resulting in a decline in real returns.

Compared with Treasury notes and bills, Treasury bonds usually pay the highest interest rates because investors want more money to put aside for the longer term. For the same reason, their prices, when issued, go up and down more than the others.

Choosing between a CD and Treasuries depends on how long of a term you want. For terms of one to six months, as well as 10 years, rates are close enough that Treasuries are the better pick. For terms of one to five years, CDs are currently paying more, and it's a large enough difference to give them the edge.

T-bills are known to be low-risk short-term investments when held to maturity since the U.S. government guarantees them. Investors owe federal taxes on any income earned but no state or local tax.

For many people, TreasuryDirect is a good option; however, retirement savers and investors who already have brokerage accounts are often better off buying bonds on the secondary market or with exchange-traded funds (ETFs). Treasury money market accounts also offer more convenience and liquidity than TreasuryDirect.

Are Treasury bills good for retirement? ›

Investors Near or in Retirement

A portfolio that includes Treasury bonds, bills, or notes, provides safety and helps to preserve their savings since Treasuries are considered risk-free investments.

You can purchase T-bills through TreasuryDirect for as little as $100 or buy them on the secondary market through your broker. Many online brokers don't charge fees for buying T-bills.

They are sold at a discount to face value, and the difference between the discounted price and face value is your return on investment. For example, if you buy a 12-week T-bill with a face value of $10,000 for $9,800, the difference of $200 is your return for holding the security for 12 weeks.

You can sell a T-Bill before its maturity date without penalty, although you will be charged a commission. (With CDs, you pay a sizeable penalty for early withdrawals.)

When the bill matures, you are paid its face value. You can hold a bill until it matures or sell it before it matures.

Interest Rates

When the Federal Reserve lowers its key interest rate, the federal funds rate, it creates additional demand for Treasuries, since they can lock in money at a specific interest rate. This additional demand for Treasuries leads to lower interest rates.

Treasury Bills, the 'safest investment' on earth, are quite profitable right now - but don't wait too long. Treasury Bills could be a great way to make inflation work for you but don't wait too long.

Treasury securities are considered a safe and secure investment option because the full faith and credit of the U.S. government guarantees that interest and principal payments will be paid on time. Also, most Treasury securities are liquid, which means they can easily be sold for cash.

Interest rate changes are the primary culprit when bond exchange-traded funds (ETFs) lose value. As interest rates rise, the prices of existing bonds fall, which impacts the value of the ETFs holding these assets.