US Treasury bills (T-bills)

Definition

US Treasury bills (T-bills) are short-term government securities with maturities ranging from a few days to 52 weeks. They are sold at a discount from their face value and do not pay periodic interest.

5 Must Know Facts For Your Next Test

1. T-bills are considered one of the safest investments because they are backed by the full faith and credit of the US government.
2. They are sold in denominations of $100 up to $10 million.
3. The return on T-bills comes from the difference between the purchase price and the face value paid at maturity.
4. T-bills can be bought directly from the Treasury or through financial institutions.
5. They play a crucial role in monetary policy as instruments for managing short-term interest rates.

Review Questions

• What is the primary way T-bills generate returns for investors?
• Why are T-bills considered one of the safest investments?
• How does the maturity period of T-bills compare to other types of bonds?

Related terms

Treasury Notes (T-notes): Treasury securities that mature in two to ten years and pay interest every six months

Treasury Bonds (T-bonds): Long-term government securities with maturities greater than ten years, paying interest semiannually

Discount Rate: The difference between the purchase price and face value of a T-bill, representing its yield