Investing term

What is Treasury bill?

A short-term government bond, typically 4–52 weeks to maturity. Considered the safest widely-available asset in its currency.

A Treasury bill (T-bill) is a short-term government bond maturing in a year or less. Instead of paying a coupon, it's sold at a discount to its face value and redeemed at the full face value — the difference is your interest. Buy a $1,000 T-bill for $985 and collect $1,000 at maturity weeks later, earning the $15.

Backed by the government, a T-bill is regarded as the safest widely available asset in its currency, and its return serves as the practical 'risk-free rate' benchmark that all other investments are measured against. It's a common home for cash that needs to stay safe and liquid, whether for an emergency fund or money waiting between investments.

Bought at a discount, redeemed at par
You pay todayat a discount$985You receive at maturityface value$1,000No coupon — the $15 gap between the discount price and face value is your interest.

A T-bill has no coupon — you pay $985, receive $1,000 at maturity, and the $15 gap is your interest. Backed by the government, it's the benchmark 'risk-free' short-term asset.

For example

Buy a $1,000 T-bill for $985 and collect the full $1,000 at maturity weeks later — the $15 is your interest, with essentially no default risk.

Learn it by doing

That's Treasury bill in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 4, Stocks, Bonds, Cash & Alternatives).

Try the free lesson →

Why it matters to you

Treasury bills matter as both a safe haven and a benchmark. As the safest short-term asset in their currency, they're where cash goes when safety and liquidity trump return. And because they're considered essentially risk-free, their yield defines the 'risk-free rate' — the baseline that the risk premium on every other investment is measured against. When you ask whether an investment's extra return justifies its risk, the T-bill yield is the starting line.

⚠ Confusing 'risk-free' with 'loss-free'

T-bills carry essentially no default risk, but they aren't free of every risk. Their low yield can fail to keep pace with inflation, so cash parked in them for years can quietly lose purchasing power. 'Risk-free' refers to getting your money back, not to protecting its real value — for long-term goals, T-bills alone won't grow your wealth.

Frequently asked questions

What is a Treasury bill?

A Treasury bill is a short-term government bond that matures in a year or less. It's sold at a discount to its face value and redeemed at full face value, with the difference serving as your interest. Backed by the government, it's considered the safest short-term asset in its currency.

How do Treasury bills pay interest?

Rather than paying a periodic coupon, T-bills are sold at a discount and redeemed at face value. If you buy a $1,000 bill for $985, the $15 gap is your interest, earned when it matures. The shorter the term and the lower the price, the higher the effective yield.

Why are Treasury bills considered risk-free?

Because they're backed by a government that can, in its own currency, always repay, giving them essentially no default risk over their short life. Their yield is used as the 'risk-free rate' benchmark. They're not free of inflation risk, though — their low return may not keep pace with rising prices.

Read the full guide

AnalysisTypes of Bonds, Explained: From Government Debt to JunkThe main types of bond — government, corporate, high-yield and sovereign — ranked by risk and yield, in plain English. Who you're lending to changes everything.9 min readAnalysisWhat Is Duration? Why a “Safe” Bond Fund Can Still Lose You MoneyDuration is the number that tells you how much a bond loses when interest rates rise. It explains 2022, it explains your bond fund, and almost nobody checks it.9 min read

Related terms

AlternativesInvestments outside the core stocks/bonds/cash mix — REITs, commodities, gold, crypto.BondA loan from you to an issuer (government or company), repaid with interest on a known schedule.Capital gainThe profit from selling an investment for more than you paid.CommodityA raw physical good like gold, oil, wheat, or copper — priced by the ounce, barrel, or bushel.
← Back to the full glossary