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T-Bills are securities issued by the US Treasury to finance the government by borrowing money from citizens. They are highly stable investments with a set expiration time and reliable performance, and can be bought by private investors, banks, and financial institutions. T-Bills do not earn interest, but the return is highly predictable and very stable.
A Treasury Bond, often abbreviated as a T-Bill, is a type of security issued by the United States Treasury through the Office of Public Debt. Along with a variety of other securities, T-Bills are used to finance the United States government by borrowing money from citizens. Investors buy T-Bills when they become available, and when they mature after a set period of time, typically less than a year, investors can redeem their T-Bills for face value. The purchase price of the T-Bill serves as a temporary loan to the United States Government, which repays it when the T-Bill matures.
The minimum purchase amount for a T-Bill is $100 United States Dollars (USD), and they are only sold in $100 USD increments. The T-Bill sells at a discount, which is determined by the Bureau of Public Debt, but the Treasury pays full face value when redeemed. For example, an investor can purchase a 90-day T-Bill for $900 USD and earn a $100 USD return on investment when the T-Bill is redeemed. Unlike many other securities, a T-Bill does not earn interest, but the return on a T-Bill is highly predictable and very stable barring the complete financial collapse of the US Treasury.
Investors may choose to include T-Bills in their profiles because they are highly stable investments with a set expiration time and reliable performance. Unlike riskier investments, a T-Bill is unlikely to return a substantial sum, but when traded in large volumes, they can represent a substantial return. Investors can potentially buy millions of dollars worth of T-Bills, assuming they own the available capital. They are also extremely liquid assets, making them a useful and versatile addition to a diverse investment portfolio.
While private investors can buy T-Bills, they can be bought by banks and other financial institutions on a much larger scale and therefore make up the majority of T-Bills trading on the day of the initial offering. Once purchased from the Treasury, a T-Bill can be sold or traded before it matures and is ready to be redeemed, and many people buy T-Bills in the secondary market, from banks and institutions that purchased the Treasury bills. Compared to other Treasury securities, the T-Bill matures much faster, creating a fast-turnover investment, unlike Treasury Notes, which mature in two to 10 years, or Treasury Bonds, which take between 10 and 30 years to mature.
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