Treasury bill

A Treasury bill is short-term debt issued by the US government with a maturity of one year or less, commonly issued in terms such as four, eight, thirteen, twenty-six, and fifty-two weeks. Unlike most bonds, a Treasury bill does not make periodic coupon payments, instead it is sold at a discount to its par value and repays the full par value at maturity, with the difference between the discounted purchase price and the par value representing the investor's return.

Because of their very short maturities and the full backing of the US government, Treasury bills are considered to carry essentially no credit risk and very little interest rate risk compared to longer-dated Treasury notes or Treasury bonds. This makes them a common home for cash that an investor wants to keep safe and liquid over a short horizon rather than exposed to the price swings that come with longer maturities.

Treasury bill yields are also closely watched as a benchmark for the risk-free rate at the short end of the market, and they tend to move closely in line with the federal funds rate set by the Federal Reserve, since both reflect the cost of very short-term, very safe borrowing. Money market funds hold large amounts of Treasury bills for exactly this reason, using them as a low-risk way to generate yield on cash while keeping the fund highly liquid.