treasury bill

Treasury Bill - T-Bill

A short term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations of $10,000 to $1 million and have maturities of three months (13 weeks), six months (26 weeks) and 12 months (52 weeks).

T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder.

Investopedia Commentary

For example, let's say you buy a 13 week T-bill priced at $9,800. Essentially, the U.S. government, and its nearly bullet-proof credit rating, writes you an IOU for $10,000 that it agrees to pay back in three months. You will not receive regular payments like you would with a coupon bond, for example. Instead, the appreciation and, therefore, value to you, comes from the difference between the discounted value you originally paid and the amount you receive back ($10,000). In this case, the T-bill pays a 2.04% interest rate ($200/$9,800 = 2.04%) over a three month period.

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See also: Banker's Acceptance, Defensive Investment, Discount, Government Security, Money Market, Off-The-Run Treasuries, On-The-Run Treasuries

Also spelled: tbill, t bill, tres bill

Treasury bill

A short-term debt security of the U.S. government that is sold in minimum amounts of $10,000 and multiples of $5,000 above the minimum. Bills with 13-week and 26-week maturities are auctioned each Monday, and 52-week bills are sold every 4 weeks. These obligations, which are very easy to resell, may be purchased through brokers, commercial banks, or directly from the Federal Reserve. Also called T bill. See also bank-discount basis, certificate of indebtedness, Form PD 4633-1.