How to Calculate Treasury Bill Yields

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.