A Treasury bill (T-bill) is a short-term U.S. government debt obligation issued by the U.S. Department of the Treasury with maturities of 4, 8, 13, 17, 26, or 52 weeks — sold at a discount to face value and redeemed at par, making the difference the investor's return.
T-bills are the shortest-duration instruments in the U.S. Treasury securities stack. They are issued with maturities under one year (4 weeks to 52 weeks) and sold through competitive and noncompetitive auctions conducted by the Treasury's Bureau of the Fiscal Service (treasurydirect.gov). Investors pay less than face value at purchase; at maturity, the Treasury pays the full face value — the difference is the implicit interest earned. T-bill yields are considered the closest thing to a 'risk-free rate' in U.S. capital markets. They are backed by the full faith and credit of the U.S. government under Article I, Section 8 of the Constitution and represent zero default risk in practice. For this reason, T-bill yields serve as the baseline against which other short-term rates are measured — including commercial paper, bank certificates of deposit, and money market fund yields. For small business owners, T-bill rates matter in several ways: (1) short-term T-bill yields set a floor on what conservative investors expect from any cash-equivalent instrument; (2) the 13-week (91-day) T-bill yield is a common benchmark for variable-rate commercial loan pricing; (3) T-bills are used in defeasance transactions on CMBS loans as the 'replacement collateral' (see [[defeasance]]). Current T-bill auction results are published at treasurydirect.gov/instit/annceresult/press/preanre/.
T-bill returns are quoted on a discount-rate basis: discount yield = ((face value − purchase price) / face value) × (360 / days to maturity). To convert to a bond-equivalent yield (comparable to annual coupon bonds), the formula adjusts for a 365-day year and the lower price base. Current auction rates are published at treasurydirect.gov/instit/annceresult/press/preanre/.
T-bill yields set the floor for short-term risk-free returns. Commercial lenders benchmark their short-term rates against T-bills. When the Fed tightens policy and T-bill yields rise (from near-zero in 2021 to 5%+ in 2023-2024), the cost of floating-rate business credit tends to rise in parallel. Monitor 13-week T-bill yields at treasurydirect.gov as a leading indicator of where short-term business financing costs are heading.
Yes. Small businesses can purchase T-bills directly through TreasuryDirect (treasurydirect.gov) with a minimum of $100 in $100 increments, or indirectly via money market funds or Treasury ETFs. T-bills are exempt from state and local income tax — a meaningful advantage for businesses in high-tax states. They are appropriate for cash reserves that won't be needed within the T-bill's maturity window.