Treasury Bills (T-Bills)

Treasury bills are the government's shortest borrowing, issued in maturities of four, eight, thirteen, seventeen, twenty-six, and fifty-two weeks. They pay no coupon. Instead you buy below face value and receive the full face amount at maturity, and the gap is your return.

They carry no meaningful credit risk, being direct obligations of the US Treasury rather than a bank deposit. That is a different kind of safety from FDIC insurance and not a lesser one — there is no $250,000 ceiling, which is why large cash balances often end up here rather than in a savings account.

The tax treatment is the underrated advantage. T-bill interest is fully taxable federally but exempt from state and local income tax, so in a high-tax state a bill can beat a savings account or CD paying a visibly higher headline rate. Comparing them requires converting to a tax-equivalent yield rather than reading the two rates side by side.

You can buy them directly through TreasuryDirect in $100 increments, or through a brokerage, which is generally easier to sell from. Placing a non-competitive bid simply accepts whatever rate the auction sets — the route almost every individual uses. Treasury money market funds and short-term Treasury ETFs hold them on your behalf for a small fee, with same-day access in exchange.

The risk that does exist is timing. Holding to maturity locks in the return you bought, but selling early means selling at market price, and prices fall when rates have risen since you bought. Over four to fifty-two weeks that movement is small — it is the reason bills, rather than long-dated bonds, are where short-term money belongs.