Drawbacks of Investing in Treasury Bills
You have to bid on them through an auction process. Bidding can be competitive or non-competitive. With the former, you have to choose your discount rate and you might not be able to purchase the bills you want.
Are Treasury bills taxed as capital gains? Normally no. However, if you buy a T-bill in the secondary market and then achieve a profit, you may be liable for capital gains depending on your exact purchase price.
Treasury bills, or bills, are typically issued at a discount from the par amount (also called face value). For example, if you buy a $1,000 bill at a price per $100 of $99.986111, then you would pay $999.86 ($1,000 x . 99986111 = $999.86111).
The accounts we recommend for parking your cash are high-yield savings accounts, money market accounts, certificates of deposit, short-term Treasury bills and notes, and money market funds. When comparing your options, consider the rate of return and accessibility of your money, among other factors.
Currently, Treasuries maturing in less than a year yield more than CDs. However, at maturities of one year and beyond, CDs yield a little more before taxes. Therefore, all things considered, it likely makes more sense to choose Treasuries over CDs for shorter-term investments, but it depends on your situation.
1 Year Treasury Rate (I:1YTCMR)
1 Year Treasury Rate is at 4.24%, compared to 4.25% the previous market day and 4.65% last year. This is higher than the long term average of 2.98%. The 1 Year Treasury Rate is the yield received for investing in a US government issued treasury security that has a maturity of 1 year.
The only interest paid will be when the bill matures. At that time, you get the full face value. T-bills are zero-coupon bonds usually sold at a discount, and the difference between the purchase price and the par amount is your accrued interest.
Because T-Bills are exempt from state and local taxes, an investor living in a high tax state such as California or New York should carefully calculate the tax equivalent yield of an alternative investment such as a bank savings account or Certificate of Deposit (CD).
Bills can be scheduled for reinvestment for up to two years; other eligible Treasury marketable securities can be scheduled to reinvest one time. When your bill matures, the proceeds will be reinvested or used to purchase the next available security of the same type and term as the original purchase.
4 Week Treasury Bill Rate is at 4.25%, compared to 4.24% the previous market day and 5.27% last year. This is higher than the long term average of 1.52%. The 4 Week Treasury Bill Rate is the yield received for investing in a US government issued treasury bill that has a maturity of 4 weeks.
The Treasury Department has streamlined the way to buy new issue T-Bills, so you need only to go TreasuryDirect.gov and follow the easy-to-understand prompts. This is the primary market to buy T-Bills; the secondary market is when you buy pre-owned T-Bills and go through a financial professional to do it.
The FDIC does not insure U.S. Treasury bills, bonds or notes, but these investments are backed by the full faith and credit of the United States government.
3 Month Treasury Rate is at 4.37%, compared to 4.36% the previous market day and 5.45% last year. This is higher than the long term average of 2.75%.
The composite rate for Series I Savings Bonds is a combination of a fixed rate, which applies for the 30-year life of the bond, and the semiannual inflation rate. The 3.11% composite rate for I bonds issued from November 2024 through April 2025 applies for the first six months after the issue date.
Treasury bonds, Treasury notes, or Treasury bills sold before their maturity date could mean a loss, depending on bond prices at the time of the sale. Simply put, the face value is only guaranteed if the Treasury is held until maturity.
What is a better investment than Treasury bills? If you're looking for alternatives to T-bills with potentially higher returns, one option is a certificate of deposit (CD). These accounts offer fixed rates that can be competitive with or even higher than T-bills.
Treasury Bills
4-week and 8-week bills are offered each week. Except for holidays or special circumstances, the offering is announced on Tuesday, the bills are auctioned on Thursday, and they are issued on the following Tuesday. 13-week and 26-week bills are offered each week.
Current Rate: 3.11%
Interest rate is calculated from a fixed rate and the inflation rate.