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Treasury Bill

The Treasury bill, or T-bill, is a zero coupon bond issued for terms of one month to one year.

The T-bill is considered to be the safest U.S. Treasury security because of the short term. T-bills are sold at auction by the Treasury Department and are usually purchased by institutions or governments.

Additional Comments:

Most individuals purchasing T-bills are doing so in the secondary market—that is, purchasing them from an institution—although recently the U.S. Treasury has made T-bills available directly to the public.

Since these bonds have no coupon interest rate, they are sold at a discount at their face value. The appreciation between the discount price and the par value or face value of the bond between issue and maturity represents the return on investment or yield of the bond.

T-bills are quoted in 1/32nds at their discount price, which is a percentage of their face value. A $10,000 bond quoted at 97–16 would be a $9,750.00 issue price. The remaining $250 would be the interest available to maturity.

Related Terms:

Treasury Note
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Treasury Bond
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