You can buy U.S. Treasury bills in two places: directly from the government through TreasuryDirect, or through a bank or brokerage account. Either way, the minimum purchase is $100, bills come in terms from 4 to 52 weeks, and most individual buyers submit a non-competitive bid that guarantees they receive the amount they asked for at whatever rate the auction sets. Here is how to buy U.S. Treasury bills, step by step.
TreasuryDirect or a Brokerage
TreasuryDirect is the government’s own online platform, with no middleman and no commissions. You link a bank account, place bids in upcoming auctions, and hold the bills electronically until they mature.
A brokerage account gives you two options. You can place a non-competitive bid in an upcoming Treasury auction (the brokerage submits it for you), or you can buy a bill that was issued earlier and is trading on the secondary market. The secondary market lets you pick a bill maturing on almost any date instead of waiting for the next scheduled auction, but the price fluctuates with current interest rates, so you may pay more or less than someone who bought the same bill at auction. Most large brokerages do not charge commissions on Treasury purchases, though you should confirm with your firm.
If you want to sell before maturity, a brokerage is easier. TreasuryDirect does not sell bills; you would have to transfer the bill out first.
What You Need to Open a TreasuryDirect Account
To open an individual account, you need four things:1TreasuryDirect. Open an Account — TreasuryDirect
- A taxpayer identification number (your Social Security Number for an individual).
- A U.S. address of record.
- A checking or savings account at a U.S. financial institution that accepts electronic debits and credits.
- An email address for account notifications and security alerts.
During registration you enter your bank’s routing number and your account number. TreasuryDirect uses that link to pull funds when you buy and to deposit proceeds when a bill matures. Entering an incorrect Social Security Number or incorrect bank details can get your account placed on hold, and clearing the hold may require paper forms.
Choosing a Term and Auction Day
Treasury bills are issued in seven standard terms: 4, 6, 8, 13, 17, 26, and 52 weeks.2TreasuryDirect. Treasury Bills Shorter terms get your money back sooner. Longer terms generally offer slightly higher yields and lock in the rate for longer.
Each term runs on a regular weekly auction schedule:3TreasuryDirect. General Auction Timing
- 4-week and 8-week bills: Thursdays.
- 13-week and 26-week bills: the following Monday.
- 17-week bills: Wednesdays.
- 52-week bills: Tuesdays.
Those days shift around holidays, so check the auction schedule before you submit a bid.
Non-Competitive vs. Competitive Bidding
At the bid screen you choose one of two methods. A non-competitive bid guarantees you receive the full amount you requested; you agree in advance to accept whatever discount rate the auction produces. This is what most individual buyers use. The maximum non-competitive bid is $10 million per auction.4TreasuryDirect. History of Treasury Marketable Securities Auctions In Depth
A competitive bid lets you specify the exact discount rate or yield you want. If your rate is at or below the rate the auction sets, you get your securities. If your rate is too high, your bid is rejected; if it matches the highest accepted rate, it may be filled only in part. Competitive bidding is designed for institutional investors and people with deep bond-market knowledge.
Either way, purchases are in $100 increments, starting at $100.
Placing the Order on TreasuryDirect
Log into your TreasuryDirect account and select the “Buy Direct” tab. Choose Treasury bills as the security type, pick the upcoming auction that matches your preferred term, and enter the dollar amount.5TreasuryDirect. Buying a Treasury Marketable Security Select non-competitive or competitive, review the summary, and confirm.
Once you submit the bid, you are committed to purchase at whatever rate the auction sets. Funds are debited from your linked bank account on the bill’s issue date, not the day you place the bid, so keep enough money in that account until the issue date arrives. After the auction settles, the bill appears electronically in your TreasuryDirect account and stays there until maturity.
Through a brokerage, the process is similar: choose a term, enter the amount, submit a non-competitive bid, and let the brokerage route it to the auction.
What You Receive at Maturity
T-bills are discount securities. You pay less than face value upfront and receive the full face value at maturity, and the difference is your interest.6TreasuryDirect. Understanding Pricing and Interest Rates For example, a $10,000 26-week bill at a discount rate of about 3.5% would cost roughly $9,823 upfront and pay $10,000 at maturity, earning about $177 in interest over six months.
At maturity, the face value is deposited into your linked bank account unless you have scheduled automatic reinvestment.
Reinvesting or Selling Early
TreasuryDirect can automatically roll a maturing bill into a new one of the same term. Schedule it when you buy, or later through “ManageDirect” by selecting “Schedule Reinvestments.” The number of consecutive reinvestments you can schedule depends on the term: up to 25 times for a 4-week bill, 7 times for a 13-week bill, and 3 times for a 26-week bill.7eCFR. 31 CFR 363.205 – How Do I Reinvest the Proceeds of a Maturing Marketable Treasury Security Each reinvestment buys at a new auction rate, so your yield may rise or fall. You can edit or cancel scheduled reinvestments, but not once the bill enters its closed-book period a day or two before maturity.
To sell before maturity, you cannot use TreasuryDirect directly. You first transfer the bill to a bank, broker, or dealer, which then sells it on the secondary market for you.8TreasuryDirect. Selling Treasury Bills Transfers start under “ManageDirect” by choosing “Transfer securities,” selecting the bill, choosing “External Transfer,” and completing Form 5511 (TreasuryDirect Transfer Request), which must be mailed. If you bought through a brokerage in the first place, you can simply place a sell order there. The price depends on current rates; if rates have risen since you bought, the market value will be lower than what you paid, and you could receive less than face value.
Taxes on T-Bill Interest
Interest on a Treasury bill is subject to federal income tax but exempt from state and local income taxes.9Internal Revenue Service. Topic No. 403, Interest Received That exemption is a real advantage in high-tax states.
Interest is reported in the year the bill matures or is sold, not the year you buy it. A 26-week bill purchased in October matures the following April, and the interest is income for that later year.10TreasuryDirect. Interest Income Reporting for Marketable Treasury Securities TreasuryDirect or your brokerage issues a 1099-INT each year showing the interest earned on bills that matured or were sold during that year.
If you hold bills in TreasuryDirect, you can have the system withhold federal income tax, up to 50 percent of the interest, each time a bill pays out. Set the percentage in your account settings.11TreasuryDirect. Tax Forms and Tax Withholding That can prevent a surprise bill at filing time if you earn significant interest across the year.