Broker Check
T-Bills are Looking More Attractive

T-Bills are Looking More Attractive

September 07, 2022

 As the Fed raises rates to battle inflation, shorter term bonds are starting to become attractive again, or at least more attractive than they have been in recent memory. We’ve started to look at T-Bills as a good place to invest short-term funds because their yields are moving above 3%.


*Here is the curve as of 9/1/2022:


1 Mo

2 Mo

3 Mo

6 Mo

1 Yr








What are T-Bills?

These are US Government Bonds with maturities of 1 year or less.


How do you buy them?

T-Bills can be purchased through the Treasury’s website, Treasury Direct.


Here’s a great article detailing the process for opening your account at Treasury Direct and navigating the site to make a purchase: How to Buy Treasury Bonds and Bills


There are some limitations when purchasing T-Bills through Treasury Direct:


Account types are limited.

You cannot open an IRA or other tax-advantaged accounts through Treasury Direct, so the interest you earn will be subject to Federal taxes. Interest is exempt from state taxes.


You cannot sell them before maturity.

Technically you can, but you would have to transfer your bonds to a brokerage account in order to sell them on the secondary market and doing so means you could take a loss if interest rates have moved up since your initial purchase.


T-Bills set the “Risk-Free” Rate:

The term risk-free rate refers to the current yield on the 3-month T-Bill. At the time of writing this (9/6/22) that’s 2.97%. Keep in mind that is not 2.97% over 3 months, the quoted interest rate refers to an annualized yield. One of the things we like about T-Bills is the low risk. These represent the money that the government raises when it takes on debt. Because the US government owes debt in US dollars, which it controls, there is very little risk of default on the repayment of any treasury bills.


T-Bills are Zero Coupon Bonds:

This means that you don’t receive interest until maturity of the bond.


Tax Implications:

Interest is exempt from state and local taxes, but is considered ordinary income for Federal Tax purposes. If purchased through Treasury direct you can specify a percentage of taxes to withhold from 0-50%. If you do withhold, Treasury Direct will send you a 1099-INT for tax reporting purposes.

When looking for low-risk, short-term investments, T-Bills have started to offer attractive interest rates compared to CD’s with similar maturities. Overall, we feel comfortable with these for individuals with excess cash who are seeking a short-term investment.

The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment.  The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. As with all investments, past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss. None of the information in this document should be considered as tax advice.  You should consult your tax professional for information concerning your individual situation.

When you link to the website provided here, you are leaving this site. We make no representation as to the completeness or accuracy of information provided at this site. Nor are we liable for any direct or indirect technical or system issues or consequences arising out of your access to or use of the third-party site. When you access this site, you assume total responsibility for your use of the site you are visiting.