How to Invest in Treasury Bills in 2025: A Complete Guide

• What Are Treasury Bills (T-Bills)?
• How to Buy Treasury Bills in 2025
• Current Treasury Bill Rates and Terms
• Pros and Cons of Investing in Treasury Bills
• Tax Considerations for Treasury Bills
• Strategies for Investing in Treasury Bills
• Frequently Asked Questions

Treasury bills (T-bills) remain one of the safest investment options in 2025, offering investors a low-risk way to park their money while earning modest returns. This comprehensive guide covers everything you need to know about T-bills - from what they are and how they work to step-by-step instructions for purchasing them through TreasuryDirect or brokerages. We'll explore current T-bill rates, tax implications, pros and cons, and strategies for incorporating T-bills into your investment portfolio. Whether you're a conservative investor looking for stability or simply want to diversify your holdings, understanding Treasury bills is essential in today's economic climate.

What Are Treasury Bills (T-Bills)?

Treasury bills (T-bills) are short-term debt securities issued by the U.S. government, serving as one of the safest investment options available. These instruments have maturities ranging from as short as four weeks up to one year (52 weeks). What makes T-bills unique is that they're sold at a discount to their face value - you pay less today to receive the full amount at maturity, with the difference representing your earnings.

Here's how they work in practice: Let's say you purchase a $1,000 T-bill for $950. When it matures, you'll receive the full $1,000, earning $50 in interest. This structure means T-bills don't pay periodic interest like bonds; instead, your return comes from the difference between purchase price and redemption value.

The U.S. Treasury conducts regular auctions where investors can participate through:

• Competitive bidding: You specify the yield you're willing to accept
• Non-competitive bidding: You accept whatever yield is determined at auction

As someone who's researched government securities extensively, I've found T-bills particularly appealing for their liquidity and safety. They're backed by the full faith and credit of the U.S. government, making them virtually risk-free in terms of default. However, it's worth noting that their returns are typically lower than other investments, reflecting their lower risk profile.

For those tracking financial markets, T-bill rates often serve as a benchmark for short-term interest rates. They're closely tied to Federal Reserve policy decisions, with yields typically rising when the Fed tightens monetary policy and falling during expansionary periods. This relationship makes them an interesting indicator for economists and market watchers alike.

How to Buy Treasury Bills in 2025

Purchasing Treasury bills (T-bills) remains one of the safest ways to invest your money while earning modest returns. As we MOVE through 2025, the process has become more streamlined than ever. Here's your comprehensive guide to acquiring T-bills through TreasuryDirect.gov:

What You'll Need Before Starting

• Identification: Your Social Security Number (SSN) or Taxpayer Identification Number (TIN)
• Contact information: A valid U.S. address and email
• Banking details: Checking or savings account information for funding purchases and receiving payments

Step-by-Step Purchase Process

After Purchase

You'll receive immediate on-screen confirmation followed by an email with transaction details. Settlement typically occurs within one business day. At maturity, your principal plus interest automatically deposits into your linked bank account.

Important Considerations

• T-bills are sold at a discount to face value (e.g., $950 for a $1,000 bill)
• No periodic interest payments - you receive the full face value at maturity
• Interest is exempt from state/local taxes but subject to federal tax
• Secondary market sales are possible through brokerages

For those looking to diversify beyond T-bills, platforms like TradingView offer excellent tools to analyze various investment options. Remember, while T-bills offer safety, their returns may not always outpace inflation, so consider them as part of a balanced portfolio.

Current Treasury Bill Rates and Terms

As of August 2025, investors have several Treasury bill (T-bill) maturity options to choose from, each offering different yield characteristics based on current market conditions. Here's a breakdown of available maturities:

• 4-week (1 month): The shortest-term option, ideal for parking cash temporarily
• 8-week (2 months): A slightly longer duration with marginally higher yields
• 13-week (3 months): Popular choice for quarterly cash management
• 17-week (4 months): Intermediate-term option
• 26-week (6 months): Common choice for semi-annual investment horizons
• 52-week (1 year): The longest T-bill maturity available

T-bill yields are primarily influenced by Federal Reserve monetary policy and broader market conditions. Typically, longer maturities command higher yields to compensate investors for the additional time risk. The recent yield trends show interesting developments:

Source: U.S. Department of the Treasury, data compiled by TradingView

What stands out in the current market is the consistent upward shift across all maturities compared to last year. The 52-week T-bill now offers a full percentage point more than it did in August 2024. This reflects the Fed's ongoing efforts to combat inflation through higher interest rates.

From my experience analyzing fixed-income markets, the steepening yield curve (where longer maturities offer proportionally higher yields) suggests investors are demanding greater compensation for longer commitments. This often indicates expectations of continued monetary tightening or economic uncertainty ahead.

It's worth noting that these yields represent the discount rates at auction - the actual return investors receive when holding T-bills to maturity. The rates are particularly attractive for risk-averse investors compared to recent years, though they still need to be evaluated against inflation expectations.

Pros and Cons of Investing in Treasury Bills

Treasury bills (T-bills) are a popular choice for investors seeking stability and security in their portfolios. Before deciding whether to invest in T-bills, it's important to weigh their advantages and disadvantages carefully.

Advantages:

• Government backing: As direct obligations of the U.S. government, T-bills carry virtually no default risk. The full faith and credit of the United States stands behind these securities.
• Accessibility: With a minimum investment of just $100, T-bills are within reach for most individual investors. They're particularly attractive for those starting with smaller amounts.
• Tax benefits: While subject to federal income tax, T-bill interest is exempt from state and local taxes. This makes them especially appealing for investors in high-tax states.
• Liquidity: The active secondary market for T-bills means you can sell them before maturity if needed, though prices may fluctuate with interest rate changes.
• Flexibility: With maturities ranging from 4 weeks to 1 year, investors can choose terms that match their cash flow needs.

Disadvantages:

• Lower yields: The trade-off for safety is typically lower returns compared to riskier assets like stocks or corporate bonds.
• No periodic income: Unlike bonds that pay regular coupons, T-bills pay all interest at maturity, which may not suit investors needing current income.
• Interest rate sensitivity: If rates rise after purchase, your T-bill becomes less valuable in the secondary market.
• Inflation risk: During periods of high inflation, T-bill returns may not keep pace with rising prices, potentially eroding purchasing power.
• Opportunity cost: Money tied up in T-bills could potentially earn higher returns elsewhere, though with greater risk.

For many investors, T-bills serve as an important portfolio stabilizer - a place to park cash while waiting for better investment opportunities or to preserve capital during market turbulence. Their simplicity and safety make them particularly suitable for conservative investors or those with short-term financial goals.

According to TradingView data, recent T-bill yields have ranged from about 4.5% to 5.5% depending on maturity, reflecting the Federal Reserve's monetary policy stance. These yields compare favorably to many bank savings accounts while offering similar safety.

Tax Considerations for Treasury Bills

Understanding the tax implications of Treasury bills (T-bills) is crucial for investors looking to maximize their returns while staying compliant with tax regulations. Here's a detailed breakdown of how T-bill taxation works:

Federal Tax Treatment

The interest earned from T-bills - calculated as the difference between the purchase price and face value - is fully taxable at the federal level. This income must be reported in the year the bill matures, regardless of whether you hold the bill to maturity or sell it earlier on the secondary market.

State and Local Tax Benefits

One of the most attractive features of T-bills is their exemption from state and local income taxes. This makes them particularly appealing for investors in high-tax states like California or New York, where the tax-equivalent yield can be significantly higher than the stated rate.

Tax Reporting Requirements

You'll receive a FORM 1099-INT from either:

• The U.S. Treasury (for bills purchased through TreasuryDirect)
• Your brokerage firm (for bills purchased on the secondary market)

This form will report the taxable interest you've earned, which you'll need to include on your federal tax return.

Secondary Market Considerations

If you sell a T-bill before maturity on the secondary market, you may incur capital gains or losses:

Tax Planning Strategies

For optimal tax efficiency:

• Consider holding T-bills in taxable accounts to take advantage of the state tax exemption
• Time your purchases to align with your income tax situation (e.g., buying bills that mature in a lower-income year)
• Keep accurate records of purchase dates, prices, and sale transactions

As with any investment decision, it's wise to consult with a tax professional about your specific situation, especially if you're dealing with large T-bill investments or complex tax circumstances.

Strategies for Investing in Treasury Bills

Sophisticated investors use several strategies with T-bills:

According to financial analysts at BTCC, "T-bills can serve as the foundation of a conservative investment strategy, particularly in volatile markets. Their predictable returns and government backing provide stability that's hard to find elsewhere."

Frequently Asked Questions

How Can Investors Buy and Sell Short Term Treasury Bills?

Investors can purchase short-term Treasury bills directly through TreasuryDirect.gov or through most brokerage accounts. Selling before maturity typically requires using a brokerage account, as TreasuryDirect doesn't support secondary market sales.

What's the Maximum Amount of Treasury Bills One Can Purchase?

For non-competitive bids in a single auction, the maximum is $10 million. Competitive bids can go up to 35% of the offering amount. Most individual investors use non-competitive bidding.

Are Treasury Bills a Good Investment During Economic Downturns?

Yes, T-bills often perform well during economic uncertainty as investors flock to SAFE assets. Their prices may rise (and yields fall) during market turmoil as demand increases.

How Do Treasury Bills Compare to Treasury Notes and Bonds?

T-bills have the shortest maturities (up to 1 year), notes range from 2-10 years, and bonds have maturities of 20 or 30 years. Bills don't pay periodic interest like notes and bonds.

Can Treasury Bills Lose Value?

If held to maturity, you're guaranteed to receive the full face value. However, if sold before maturity on the secondary market, you could receive less than you paid if interest rates have risen.

How Often Are Treasury Bill Auctions Held?

4-week and 8-week T-bills are auctioned weekly, while 13-week and 26-week bills are auctioned every Monday. 52-week bills are auctioned every four weeks.