What are Treasury bills (T-bills)?

Treasury bills, commonly referred to as T-bills, are short-term debt instruments issued by the U.S. government to raise funds for various governmental needs, including covering short-term budget deficits. They are sold at a discount to their face value, meaning investors purchase them for less than their maturity value, and the difference represents the interest earned by the investor upon maturity. For example, if a T-bill has a face value of $1,000 and is sold for $950, the investor will receive $1,000 at maturity, earning $50 in interest.

T-bills are considered a safe investment as they are backed by the full faith and credit of the U.S. government, making them virtually free of default risk. The short maturity periods typically range from a few days up to one year, distinguishing them from other types of securities such as stocks, corporate bonds, or longer-term government bonds. This distinct characteristic, along with their issuance and discount pricing, clearly identifies them as discounted securities issued by the U.S. government.