{"post":{"slug":"treasury-bills-explained-2026","title":"Treasury Bills Explained: How T-Bills Work","excerpt":"Treasury bills are short-term government debt sold at a discount instead of paying a coupon. Here is exactly how the math works and where to buy them in 2026.","category":"finance","date":"August 10, 2026","author":"ByteLedger Team","content":"<span class=\"dropcap\">A</span> treasury bill, or T-bill, is a loan you make to the US government for a year or less, and it pays you back in an unusual way: there is no separate interest payment at all. Instead you buy the bill for less than its face value, and the difference is your return. Understanding that one mechanic explains almost everything else about how T-bills work and why they have become a popular parking spot for cash in 2026.\n\n## What changed in 2026\n\n- **Short-term yields have stayed genuinely competitive with savings accounts and CDs**, keeping bills popular with investors who want safety without locking up money for years.\n- **Buying directly through a brokerage got easier**, with many platforms now offering commission-free auction access alongside the traditional TreasuryDirect route.\n- **Auction schedules remained frequent**, with 4-week, 8-week, 13-week, 17-week, 26-week, and 52-week bills auctioned on a regular, published calendar.\n- **The secondary market stayed liquid**, so selling a bill before maturity is straightforward, though the price you get depends on where rates have moved since you bought it.\n\n## How the discount pricing works\n\nA T-bill has a face value, commonly $1,000 or a multiple of it, that the government pays you at maturity. You buy it for less than that face value, and the gap is your entire return — there is no coupon paid along the way.\n\nFor example: say a 26-week bill has a $10,000 face value and you buy it at auction for $9,750. Hold it to maturity and the government pays you $10,000 — a $250 return on a $9,750 investment over about six months. That works out to roughly a 5.1% annualized yield, using the standard treasury yield calculation. The exact discount changes with every auction based on demand and prevailing rates.\n\n## Where to buy T-bills\n\n| Method | Cost | Minimum | Notes |\n| --- | --- | --- | --- |\n| TreasuryDirect.gov | Free | $100 | Direct government account; funds settle from a linked bank account |\n| Brokerage account | Often free | Varies, some as low as $100 | Bills sit alongside your other holdings; easier to manage in one place |\n| Bond fund or ETF | Expense ratio applies | Price of one share | No fixed maturity; a rolling basket rather than individual bills |\n\nTreasuryDirect is the only way to buy paper savings bonds, but for T-bills specifically, a brokerage account is often more convenient since it keeps everything in one statement and makes reinvesting or laddering easier.\n\n## Maturities at a glance\n\n- **4-week and 8-week bills** — the shortest options, close to a pure cash substitute.\n- **13-week and 26-week bills** — the most commonly laddered maturities for money needed within six months to a year.\n- **17-week bills** — a newer addition that fills a gap between the 13-week and 26-week points.\n- **52-week bills** — the longest bill maturity, sold less frequently than the shorter ones.\n\n## Common mistakes\n\n**Selling before maturity and expecting the purchase-price math to hold.** Once a bill trades on the secondary market, its price reflects current rates, not your original discount — you could get more or less than a straight-line calculation would suggest.\n\n**Forgetting the state tax exemption when comparing to a CD.** T-bill interest is exempt from state and local income tax, so the after-tax comparison to a bank CD often favors the bill more than the sticker yield suggests, especially in high-tax states.\n\n**Not laddering maturities.** Buying only one maturity means all your cash comes due — and needs reinvesting — at once. Spreading purchases across several maturities smooths that out, as covered in [how to ladder treasury bills](/blog/how-to-ladder-treasury-bills-2026).\n\n**Confusing bills with bonds.** Bills top out at 52 weeks; anything longer is a treasury note or treasury bond, which pay a coupon and carry more price sensitivity to rate changes.\n\n## FAQ\n\n**Do T-bills pay interest?**\nNot in the traditional sense. The return comes entirely from buying at a discount and receiving full face value at maturity — there is no separate coupon payment.\n\n**Is there a minimum to buy a T-bill?**\nAt TreasuryDirect, the minimum is typically $100, with purchases in $100 increments up to the auction limit.\n\n**Can I lose money on a T-bill?**\nHeld to maturity, no — you receive the full face value. If you sell before maturity on the secondary market, the price could be below what you paid if rates have risen since.\n\n**How is T-bill interest taxed?**\nThe discount is taxed as ordinary income at the federal level in the year the bill matures or is sold, and it is exempt from state and local income tax. Confirm specifics with a tax professional.\n\n## Where to go next\n\nFor how bills compare to longer treasuries, see [treasury bills vs bonds in 2026](/blog/treasury-bills-vs-bonds-2026). To put several maturities to work together, read [how to ladder treasury bills](/blog/how-to-ladder-treasury-bills-2026), and for the inflation-linked alternative, see [I bonds explained for 2026](/blog/i-bonds-explained-2026).","hue":317,"metaTitle":"Treasury Bills Explained: How T-Bills Work","metaDescription":"Treasury bills explained for 2026 — how the discount-pricing math works, available maturities, where to buy T-bills, and the mistakes to avoid.","keywords":["treasury bills explained","how do treasury bills work","what are t-bills","buy treasury bills 2026","treasury bills discount pricing","treasurydirect vs brokerage","short term treasury yields 2026","t-bill maturities","treasury bill taxes"],"tldr":["**T-bills sell at a discount to face value** — there is no separate coupon; your return is the gap between purchase price and the amount paid at maturity.","**Maturities run from four weeks to 52 weeks**, making bills a tool for cash you expect to need within the next year.","**You can buy them two ways** — free through TreasuryDirect, or through most brokerage accounts alongside your other holdings.","**Interest is exempt from state and local tax**, which matters more the higher your state income tax rate is.","**Skip:** assuming a T-bill and a bank CD are interchangeable — a bill sold before maturity trades at a market price that can be above or below what you paid."],"readTime":"4 min read","wordCount":835},"related":[{"slug":"how-to-ladder-treasury-bills-2026","title":"How to Ladder Treasury Bills in 2026","excerpt":"A T-bill ladder spreads cash across staggered maturities so money keeps coming due on a schedule. 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