Treasury Bills (T-Bills)

What Are Treasury Bills (T-Bills)?

Treasury bills (T-bills) are short-term debt securities that governments issue to raise funds, with maturities of one year or less, sold at a discount to their face value.

Governments issue T-bills through auctions where investors bid on the price they are willing to pay. The difference between the purchase price and the face value represents the investor's return. T-bills do not pay periodic interest; instead, the yield is determined by the discount at which they are purchased.

How Treasury Bills Work

Investors purchase T-bills at a price lower than their face value. For example, if a T-bill has a face value of $1,000 and is sold at $950, the investor pays $950 upfront. 

When demand for T-bills increases, prices rise and yields fall, which may lead to lower interest rates on mortgages, car loans, and business loans. Conversely, when demand drops, yields rise and borrowing becomes more expensive. 

T-bill demand can also indicate investor confidence: high demand suggests a preference for safety, while low demand may indicate greater confidence in the economic outlook.

Treasury Bills and Crypto Markets