What Are Treasury Bills (T-Bills)?
Treasury bills (T-Bills) are short-term debt securities issued by the U.S. government to finance its operations and pay for public projects. They have a maturity of one year or less, with maturities ranging from four weeks to 52 weeks. T-bills are sold in denominations of $100,000 and can be purchased directly from the Treasury Department at auction or through banks and brokers on the secondary market.
The interest rate paid on T-bills is determined at auction based on supply and demand; investors who bid higher rates receive priority when purchasing them. The return earned by an investor depends upon how long they hold onto their investment before it matures; generally speaking, longer maturities offer higher yields than shorter ones do due to increased risk associated with holding them for a longer period of time. Additionally, since T-bills are backed by the full faith and credit of the U.S., they carry virtually no default risk which makes them attractive investments for those seeking safety as well as yield potential over other fixed income instruments such as bonds or CDs