Treasury bills are sold at a discount and pay face value at maturity. The catch that trips up most investors: the quoted discount rate is not the return you earn. This calculator shows both numbers side by side so you can compare a T-bill against a CD or savings account correctly.
Example 1 — Why the two yields differ. A 13-week (91-day) T-bill with a $10,000 face value is quoted at a 5.00% discount rate. Price = 10,000 × (1 − 0.05 × 91/360) = $9,873.61. Your profit is $126.39 on a $9,873.61 investment over 91 days. Annualized on a 365-day basis that is 5.14% — not 5.00%. The discount rate understates your return because it uses a 360-day year and divides by face value rather than the price you actually paid.
Example 2 — The gap widens with the rate. At a 5.00% discount rate on 52-week paper, the investment yield comes out around 5.40%. The higher the discount rate, the wider the spread between the quoted and actual yield, because the discount is a larger fraction of the price.
Example 3 — Comparing to a CD fairly. A 4.90% APY CD vs a T-bill with a 5.14% investment yield looks like a T-bill win. But T-bill interest is exempt from state and local tax while CD interest is not. If you pay 6% state tax, the T-bill's tax-equivalent advantage is worth roughly 30 basis points. Enter both figures after tax before deciding.
Example 4 — Laddered rolls. Rolling a 13-week bill four times a year at a 5.20% investment yield compounds to roughly 5.31% annualized, because each quarter's interest buys a slightly larger bill. This is the mechanical advantage of a rolling T-bill ladder over a single purchase.
Same 5.00% quoted discount rate, different terms — note how the actual yield you earn climbs:
| Term | Days | Price per $1,000 | Discount Rate | Investment Yield |
|---|---|---|---|---|
| 4-week | 28 | $996.11 | 5.00% | 5.07% |
| 8-week | 56 | $992.22 | 5.00% | 5.09% |
| 13-week | 91 | $987.36 | 5.00% | 5.14% |
| 17-week | 119 | $983.47 | 5.00% | 5.15% |
| 26-week | 182 | $974.72 | 5.00% | 5.22% |
| 52-week | 364 | $949.44 | 5.00% | 5.41% |
TreasuryDirect sells bills in $100 increments. Brokers usually enforce a $1,000 minimum on the secondary market.
T-bill interest is exempt from state and local income tax, which is a genuine edge over CDs and savings accounts in high-tax states.
Bills pay no periodic interest. You buy below par and receive par at maturity — the difference is your interest.
Buying at auction avoids bid-ask spread. Buying on the secondary market lets you pick any maturity but costs a spread.
When the US Treasury auctions a bill, it reports the result as a discount rate — also called the bank discount yield. That convention has two quirks baked into it. First, it divides the discount by the bill's face value rather than the price you actually pay. Second, it annualizes using a 360-day year instead of 365. Both choices understate the return a buyer earns, and both are legacies of how money-market instruments have been quoted since the 1920s.
The number that matters to you is the investment yield, sometimes called the coupon-equivalent or actual yield. It divides the discount by the price paid and annualizes over 365 days. On a 13-week bill quoted at 5.00%, the investment yield is about 5.14%. On 52-week paper the gap is closer to 41 basis points. If you compare a quoted discount rate directly against a CD's APY, you will systematically underestimate the T-bill and may make the wrong choice.
T-bills are the default parking place for cash that needs to be safe, liquid, and short-dated. They suit investors holding a down payment, emergency reserves above what a savings account should hold, corporate treasuries managing working capital, and anyone in a high-tax state who wants the state income tax exemption. They do not suit investors seeking long-duration returns, because a 4-week bill gives you almost no rate lock — if rates fall you simply roll into a lower yield at the next auction.
Treasury runs a predictable schedule. Four-, 8-, 13-, and 26-week bills are auctioned weekly, typically announced on Tuesday and settled on Thursday. The 17-week bill is auctioned every four weeks, and the 52-week bill is auctioned every four weeks as well. Because new supply arrives on a fixed cadence, a ladder is easy to build: split your cash into four equal pieces and buy 13-week bills four weeks apart, so one matures roughly every month and you are never forced into a bad rate environment all at once.
| Feature | Treasury Bill | Bank CD | High-Yield Savings | Money Market Fund |
|---|---|---|---|---|
| Typical recent yield | 4.3% – 5.4% | 4.0% – 5.2% | 4.0% – 5.0% | 4.2% – 5.1% |
| State / local tax | Exempt | Taxable | Taxable | Mostly taxable |
| Federal tax | Taxable | Taxable | Taxable | Taxable |
| Safety | Full faith of US govt | FDIC to $250k | FDIC to $250k | Not insured |
| Liquidity | Secondary market or hold | Penalty if broken | Immediate | Immediate |
| Minimum | $100 at auction | Varies, often $1,000 | Often $0 | Often $1,000+ |
| Rate lock | Until maturity only | Full term | None | None |
Yields shown are illustrative recent-market ranges and change continuously with Federal Reserve policy. Confirm live quotes before purchasing.
⚠️ Important Note: This calculator applies the standard Treasury formulas for discount rate, price, and investment yield using the inputs you provide. Real auction results depend on the bid-to-cover ratio, competitive bidding, and Treasury's own rounding to the nearest cent at each auction. Holding a bill to maturity carries no market risk, but selling before maturity exposes you to price changes as rates move. Secondary-market purchases incur a bid-ask spread that this tool does not model. This is not investment advice.
The discount rate is what Treasury quotes at auction: it divides the discount by face value and annualizes over 360 days. The investment yield divides the discount by the price you actually paid and annualizes over 365 days, so it is always higher and represents the return you truly earn.
Price equals face value multiplied by one minus the discount rate times days to maturity divided by 360. For a 91-day bill with a $10,000 face value and a 5.00% discount rate, the price works out to $9,873.61, which means you pay $126.39 less than par.
Yes. Interest on Treasury bills is exempt from state and local income tax in every state, though it remains subject to federal income tax. That state exemption is a real advantage over bank CDs and savings accounts, and it matters most for residents of high-tax states.
A ladder splits your cash across bills of staggered maturities — for example four equal positions in 13-week bills bought four weeks apart. One bill then matures roughly every month, which smooths out reinvestment risk so you are never forced to roll your entire balance at a single moment when rates may be unfavorable.
If you hold a bill to maturity you cannot lose money, because the full faith and credit of the US government stands behind it and you receive par. You can lose money only if you sell before maturity into a rising-rate market, where the bill will be worth less than your purchase price, or if you count the opportunity cost of inflation exceeding your yield.
TreasuryDirect sells bills in $100 increments with a $100 minimum, so individual investors can start very small. Brokerages that offer bills on the secondary market typically require a $1,000 minimum purchase, though some now allow smaller amounts.