Are Treasury bills risk-free?

T-bills carry effectively zero credit risk because they are backed by the full faith and credit of the US government. However, they are not entirely without risk. If you sell before maturity on the secondary market, you may receive slightly more or less than you paid depending on interest rate movements. And like all fixed-income investments, T-bill returns may not keep pace with inflation. But for capital preservation, they are the safest instrument available.

How are T-bill returns taxed?

T-bill interest is subject to federal income tax but exempt from state and local income tax. This is a significant advantage for residents of high-tax states like New York, California, and New Jersey. The interest is reported in the year the T-bill matures, not when you purchase it. You will receive a 1099-INT from TreasuryDirect or your brokerage at tax time.

What is the minimum investment for Treasury bills?

The minimum purchase on TreasuryDirect.gov is $100, and T-bills are sold in $100 increments above that. Most brokerages also allow purchases at auction starting at $1,000 or less, with no commissions. T-bill ETFs like SGOV can be bought for the price of a single share, making entry even more accessible.

Should I move my entire emergency fund into T-bills?

Not all of it. T-bills are not instantly liquid — they have set maturity dates, and selling early requires a brokerage with secondary market access. A practical approach is to keep one to two months of essential expenses in a high-yield savings account for immediate access, and move the remainder into a T-bill ladder. This way you maintain emergency liquidity while earning better after-tax returns on the bulk of your reserves.

Treasury Bills: A Smarter Place to Park Your

High-yield savings accounts grabbed headlines during the rate-hiking cycle, but the quiet winner for cash savers has always been Treasury bills. With 3-month T-bills yielding 3.61% and HYSA rates sliding as the Fed cuts, T-bills deserve a serious look — especially if you live in a high-tax state. They offer comparable yields, superior safety as direct obligations of the US government, and a tax advantage that most savers overlook entirely.

What Are Treasury Bills?

Treasury bills are short-term debt securities issued by the US Department of the Treasury. Unlike bonds that pay periodic interest, T-bills are sold at a discount to their face value and mature at par — the difference is your return.

They come in six maturities: 4 weeks, 8 weeks, 13 weeks (3 months), 17 weeks, 26 weeks (6 months), and 52 weeks (1 year). The Treasury auctions new bills on a regular schedule, and they're backed by the full faith and credit of the United States government. That makes them effectively the safest investment on earth — safer than any bank deposit above the FDIC insurance limit.

Here's a practical example: if you buy a 13-week T-bill with a face value of $10,000, you might pay roughly $9,911 today. Thirteen weeks later, you receive $10,000. That $89 difference is your interest, and it works out to approximately 3.61% annualised.

Current T-Bill Yields vs the Alternatives

As of March 11, 2026, the 3-month T-bill yields 3.61%. That sits right alongside the Fed Funds rate of 3.64% and the 2-year Treasury yield of 3.64%. For context, the 10-year Treasury yields 4.21%, reflecting the term premium investors demand for locking up money longer.

The key comparison for most savers is T-bills versus high-yield savings accounts. Top HYSAs still advertise rates near 3.80%, but those rates are falling and will continue to drop as the Fed eases further. Six months ago, many HYSAs offered 4.5% or more. T-bill yields are falling too, but here's the critical difference: when you buy a T-bill, you lock in that rate for the full term. Your HYSA rate can change tomorrow with no notice.

CDs offer similar rate-locking, but they typically charge early withdrawal penalties. A T-bill can be sold on the secondary market before maturity with no penalty — though you'll receive the market price, which could be slightly more or less than what you paid.

The State Tax Advantage Most Savers Miss

Here's where T-bills pull ahead for millions of Americans: interest from Treasury securities is exempt from state and local income tax. You only pay federal tax.

That might sound like a minor detail, but run the numbers. If you live in California (top marginal rate 13.3%), New York (top rate 10.9% plus NYC's additional 3.876%), or New Jersey (top rate 10.75%), the tax savings are substantial.

Consider a saver in New York City with $50,000 in cash earning 3.61%. In a HYSA, state and city taxes could claim roughly $750 of that interest. In T-bills, that money stays in your pocket. The effective after-tax yield of a 3.61% T-bill for a New York City resident in the top bracket can be equivalent to a HYSA paying well over 4%.

Even in states with moderate income taxes — Virginia at 5.75%, Colorado at 4.4% — the exemption adds meaningful basis points. If you live in a state with no income tax (Texas, Florida, Washington, and others), this advantage doesn't apply, and the comparison comes down to convenience versus safety.

How to Buy Treasury Bills

You have three main options, each with trade-offs.

TreasuryDirect.gov is the government's own platform. You can buy T-bills directly at auction with no fees or commissions. The minimum purchase is just $100. The interface is dated and the user experience is frankly poor, but it works. One limitation: you cannot easily sell before maturity through TreasuryDirect.

Brokerage accounts at firms like Fidelity, Schwab, or Vanguard let you buy T-bills at auction or on the secondary market. Most charge no commission for Treasury purchases. The advantage here is flexibility — you can sell before maturity, manage T-bills alongside your other investments, and set up automatic reinvestment. For most people, this is the best option.

T-bill ETFs like SGOV (iShares 0-3 Month Treasury Bond ETF) or BIL (SPDR Bloomberg 1-3 Month T-Bill ETF) give you T-bill exposure with the simplicity of buying a stock. You get daily liquidity and no need to manage maturities. The downside is a small expense ratio (SGOV charges 0.09% annually) and slightly less precise yield targeting. ETFs also distribute interest as ordinary dividends, though the state tax exemption generally still applies — check your state's rules.

Building a T-Bill Ladder

A T-bill ladder is a straightforward strategy: instead of putting all your cash into one maturity, you spread it across several. This gives you regular access to your money while capturing current rates across the curve.

Here is a simple example with $40,000. You would buy $10,000 in 4-week T-bills, $10,000 in 13-week bills, $10,000 in 26-week bills, and $10,000 in 52-week bills. Every few weeks, a tranche matures, and you can either spend the cash or reinvest at the prevailing rate.

This matters especially now. The Fed has cut from 4.22% in September 2025 to 3.64% in February 2026, and markets expect further easing. A ladder strategy means your longer-dated T-bills keep earning today's rates even if short-term yields drop further. Meanwhile, your shorter-dated bills provide liquidity and the option to redirect cash if better opportunities emerge.

TreasuryDirect and most brokerages offer automatic reinvestment at auction, which makes maintaining a ladder nearly effortless once set up.

T-Bills vs HYSAs vs CDs: Choosing the Right Tool

Each of these serves a purpose, and the right answer depends on your situation.

T-bills win on safety (direct US government obligation, not subject to FDIC limits), state tax exemption, and rate-locking. They're ideal for amounts above the $250,000 FDIC insurance limit, for residents of high-tax states, and for anyone who wants to lock in today's rates before further Fed cuts.

HYSAs win on simplicity and instant liquidity. There is no auction to wait for, no maturity to track, and no secondary market to navigate. If you need same-day access to your emergency fund, a HYSA is the right call. The trade-off is a variable rate that will keep falling.

CDs win on guaranteed rates over longer periods, often with slightly higher yields than T-bills of the same maturity. But they come with early withdrawal penalties and are subject to state tax. A 12-month CD might beat a 52-week T-bill by a few basis points before tax, only to lose that edge after state taxes.

A practical approach for most people: keep one to two months of expenses in a HYSA for true emergencies, and move the rest of your cash reserves into a T-bill ladder. You get better after-tax returns, superior safety, and enough liquidity for any realistic need.

Who Should Consider T-Bills Right Now

T-bills are not exotic instruments. They are the simplest, safest securities the US government issues. But they make the most sense for specific profiles.

High-tax-state residents in New York, California, New Jersey, Connecticut, and similar states benefit most from the state tax exemption. The higher your state tax rate, the wider the effective yield gap over HYSAs.

Emergency fund overflow is a natural fit. Once you have immediate-access cash covered in a HYSA, additional reserves can earn more in T-bills without meaningfully sacrificing liquidity.

Short-term savings goals — a home down payment in six to twelve months, a tuition payment next semester, a planned large purchase — align well with T-bill maturities. You pick the maturity that matches your timeline and know exactly what you'll receive.

Savers with large cash positions above the $250,000 FDIC limit should consider T-bills seriously. There is no cap on Treasury holdings, and the credit risk is effectively zero.

Rate-sensitive savers who want to lock in current yields before further Fed cuts can use 26-week or 52-week bills to secure today's rates. With inflation still running (CPI at 327.460 in February 2026, up from 326.588 in January) and the Fed navigating between price stability and slowing growth, the rate path is uncertain — but the direction has been down.

Conclusion

Treasury bills won't make anyone rich, and they're not meant to. They're meant to keep your cash safe, earn a fair return, and avoid giving the tax collector more than necessary. With HYSA rates sliding and the Fed still in its easing cycle, T-bills offer something valuable: a locked-in yield, zero credit risk, and a state tax break that high-tax-state residents cannot afford to ignore. The buying process takes minutes through a brokerage account, and a simple ladder strategy can keep your cash both productive and accessible. For the portion of your savings that needs to stay safe and liquid, T-bills remain one of the most sensible options available.

Treasury Bills: A Smarter Place to Park Your Cash

Key Takeaways

What Are Treasury Bills?

Current T-Bill Yields vs the Alternatives

The State Tax Advantage Most Savers Miss

How to Buy Treasury Bills

Building a T-Bill Ladder

T-Bills vs HYSAs vs CDs: Choosing the Right Tool

Who Should Consider T-Bills Right Now

Conclusion

Frequently Asked Questions

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