How to Calculate Treasury Bill Yields
You buy Treasury bills at a discounted price — say $96 for a four-week bill — and receive the face value of $100 at the end of the four weeks.
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Interested in buying Treasury bills but don’t know how you’ll make money? We’ll explain.
T-bills don’t pay interest in the same way as other Treasurys. Instead, you buy the bills at a discounted price and hold them until the end of the term. Once the term ends, or reaches maturity, you receive the face value.
Let's look at a Treasury bill auction to see how a Treasury bill purchase works.
On May 15, 2024, the Treasury held an auction for a 17-week Treasury bill with an issue date of May 21 and a maturity date of Sept. 17. The price per $100 amounted to about $98.27, or an annualized discount rate (shown as a "high rate" in TreasuryDirect) of 5.225%.
If you bought $1,000 worth of T-bills in this auction, that means you would have paid $982.73 on May 15. On Sept. 17, you'd receive $1,000, earning $17.27 on your investment.
If you were to reinvest in this T-bill for one year, you could arrive at an annual investment rate for your 17-week T-bill based on the actual purchase price of $982.73.
To explore how this works, use our T-bill calculator below.
» Learn more in our full guide on Treasury bills.