Treasury bill

A treasury bill is a short-term debt security that is issued by the United States government to raise money. It is issued with maturity dates of either four weeks, 13 weeks, or 26 weeks. There is no stated interest rate on the instrument; instead, it is sold at a discount to the face amount, and the buyer earns interest on the difference between the discounted purchase price and the redemption amount. Treasury bills are sold via a competitive bidding process, so the discount amount will vary by auction. For example, the Treasury sells a treasury bill with a face value of $1,000 for $984. The $16 difference is the interest that the investor will earn.

Treasury bills are popular among investors that want to avoid all risk, since these instruments are backed by the credit of the United States government. Institutional investors are the primary purchasers of treasury bills.

Related Courses

Corporate Cash Management 
Corporate Finance 
Treasurer's Guidebook