3 Reasons to Buy T-Bills Yourself and Not Through Your Bank (2024)

FAQs

3 Reasons to Buy T-Bills Yourself and Not Through Your Bank? ›

Treasury bills (T-bills) are short-term securities with maturities ranging from four weeks to 52 weeks. By buying directly from the U.S. Treasury, you can avoid paying any extra fees or commissions to your bank. The U.S. Treasury has a $100 minimum to purchase a T-Bill, which is a lower minimum than many banks.

You can buy them from the government directly, and many buy them through a brokerage, retirement or bank account. Treasury owners pay federal taxes on the investment interest earned but no state or local taxes. Investors may turn to Treasurys during periods of volatility or uncertainty due to their safety.

Pros and Cons of T-Bills

However, should interest rates rise, the existing T-bills fall out of favor since their return is less than the market. For this reason, T-bills have interest rate risk, which means there is a danger that bondholders might lose out should there be higher rates in the future.

However, the bank may charge you fees or commissions for the transaction.

You can buy (bid for) Treasury marketable securities through: your TreasuryDirect account — non-competitive bids only. a bank, broker, or dealer — competitive and non-competitive bids.

Buffett likes cash—particularly U.S. Treasury bills—and stocks, although he has reduced Berkshire's big equity portfolio with Barron's estimating sales of Apple stock at around $85 billion this year.

Choosing between a CD and Treasuries depends on how long of a term you want. For terms of one to six months, as well as 10 years, rates are close enough that Treasuries are the better pick. For terms of one to five years, CDs are currently paying more, and it's a large enough difference to give them the edge.

Treasury bonds, Treasury notes, or Treasury bills sold before their maturity date could mean a loss, depending on bond prices at the time of the sale. Simply put, the face value is only guaranteed if the Treasury is held until maturity.

Bonds are generally considered a less-risky complement to the volatility of stocks in an investment portfolio. U.S. Treasurys, and specifically Treasury bills and Treasury notes, are the benchmark for a nearly risk-free investment if held to maturity.

Key Takeaways

Interest from Treasury bills (T-bills) is subject to federal income taxes but not state or local taxes. The interest income received in a year is recorded on Form 1099-INT. Investors can opt to have up to 50% of their Treasury bills' interest earnings automatically withheld.

How much does a $1000 T bill cost? ›

Treasury bills, or bills, are typically issued at a discount from the par amount (also called face value). For example, if you buy a $1,000 bill at a price per $100 of $99.986111, then you would pay $999.86 ($1,000 x . 99986111 = $999.86111). * When the bill matures, you would be paid its face value, $1,000.

When the bill matures, you are paid its face value. You can hold a bill until it matures or sell it before it matures.

No, Treasury Bills (T-Bills) are not insured by the Federal Deposit Insurance Corporation (FDIC). However, they are backed by the full faith and credit of the U.S. Government, making them considered one of the safest investments.

Treasury bills are backed by the full faith and credit of the U.S. government. CDs and high-yield savings accounts are backed by the FDIC at banks and the NCUA at credit unions for up to $250,000 per depositor.

You can only buy T-bills in electronic form, either from a brokerage firm or directly from the government at TreasuryDirect.gov. (You can also buy Series I savings bonds through TreasuryDirect.gov). Versus Treasury bonds, Treasury bills have shorter maturity dates.

Let's say you purchase a $10,000 T-bill with a discount rate of 3% that matures after 52 weeks. That means you pay $9,700 for the T-bill upfront. Once the year is up, you get back your initial investment plus another $300.

3 Month Treasury Bill Rate is at 4.85%, compared to 4.89% the previous market day and 5.31% last year. This is higher than the long term average of 4.19%.

Investors can also buy T-bills in the secondary market, although purchasing new issues is generally a wiser option. If you buy bonds in the secondary market, you'll have to pay the bid/ask spread, an unnecessary cost since auctions are held frequently.

Bills are sold in increments of $100. The minimum purchase is $100. All bills except 52-week bills and cash management bills are auctioned every week. The 52-week bill is auctioned every four weeks.