Treasury bills are short-term US government debt securities maturing in 4, 8, 13, 17, 26, or 52 weeks. They are the safest possible investment. Backed by the full faith and credit of the US government. And they often pay more than bank savings accounts.
The extra benefit: interest is exempt from state and local income taxes.
Current T-Bill Rates in 2026
| Term | Approximate Yield |
|---|---|
| 4-week | 4.30% |
| 8-week | 4.40% |
| 13-week (3 months) | 4.50% |
| 17-week | 4.55% |
| 26-week (6 months) | 4.65% |
| 52-week (1 year) | 4.70% |
Rates change with each auction (weekly or monthly depending on term). Check TreasuryDirect.gov for current auction rates.
How T-Bills Are Priced
T-Bills are sold at a discount to face value and mature at face value. You do not receive periodic interest payments.
Example: 26-week T-bill with a 4.65% discount rate:
- Purchase price on $10,000 face value: $10,000 x (1 - 0.0465 x 182/360) = $9,765
- At maturity: $10,000
- Interest earned: $235 (discount rate basis calculation gives ~$232 on investment yield basis)
The "discount rate" published in auctions differs slightly from the "investment yield." Use the investment yield for apples-to-apples comparison with savings accounts.
The State Tax Advantage
Bank savings account interest is subject to federal, state, and local income taxes.
US Treasury interest is subject to federal income tax only. It is fully exempt from state and local taxes.
Impact at different state tax rates, $10,000 invested at 4.65% T-bill vs 4.65% HYSA:
| State Tax Rate | T-Bill After-Tax Yield | HYSA After-Tax Yield |
|---|---|---|
| 0% (TX, FL) | 4.65% | 4.65% |
| 3% | 4.65% | 4.51% |
| 5% | 4.65% | 4.42% |
| 8% (NY, CA) | 4.65% | 4.28% |
| 13.3% (CA top) | 4.65% | 4.03% |
In California, a T-bill at 4.65% beats a HYSA at 4.65% by 0.62% on an after-tax basis. That difference is meaningful on large balances.
How to Buy T-Bills
TreasuryDirect.gov: Buy directly from the government at auction. No fees. Minimum $100. Cons: UI is clunky, takes 1-2 business days to settle, harder to sell before maturity.
Brokerage account (Fidelity, Schwab, Vanguard): Buy at auction or on the secondary market. Familiar interface, easy to sell before maturity, can automate rolling. Small bid-ask spread on secondary market purchases.
Treasury ETFs: SGOV (iShares 0-3 Month Treasury Bond ETF) holds ultra-short T-bills. 0.07% expense ratio. Easy to buy/sell, but expense ratio slightly reduces yield.
Rolling T-Bills (Automatic Reinvestment)
At TreasuryDirect, you can set up automatic reinvestment. When your T-bill matures, the proceeds are automatically used to purchase a new T-bill of the same term.
At a brokerage, you can buy a ladder of T-bills maturing at regular intervals (every 4 or 8 weeks) to maintain liquidity while capturing yield.
T-Bills vs Money Market Funds
| T-Bills | Government Money Market Fund | |
|---|---|---|
| State tax exempt | Yes | Yes (government MMF only) |
| Yield | Very similar | Very similar |
| FDIC/SIPC | No (Treasury guarantee) | No (extremely low risk) |
| Minimum | $100 | Varies ($1 at most brokers) |
| Liquidity | Secondary market sale | Daily |
For money held at a brokerage, a government money market fund is usually more convenient than direct T-bill purchases. For larger balances or sophisticated investors who want to lock in a specific rate, T-bills may be preferable.
See Best Savings Accounts for comparison with HYSA rates, and Best CD Rates for locked-rate alternatives.
Use the CalcMoney Savings Goal Calculator to model T-bill returns versus other savings options over your time horizon.
Frequently Asked Questions
Are T-bills affected by stock market crashes?
T-bills often perform well during market crashes because investors flee to safety. In 2008 and 2020, Treasury yields fell (prices rose) as capital flooded into government securities. T-bills are the closest thing to a risk-free asset that exists.
What is the secondary market for T-bills?
If you need cash before your T-bill matures, you can sell it on the secondary market through your brokerage. You receive the current market price, which may be slightly above or below your purchase price depending on rate movements. For very short maturities (4-8 weeks), the price difference is minimal.
Do T-bills count toward FDIC insurance limits?
No. T-bills are not bank deposits and are not covered by FDIC. They are backed directly by the US Treasury, which makes FDIC coverage unnecessary. Treasury securities are considered more secure than FDIC-insured deposits because the backstop is the US government, not the FDIC fund.
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