Involved in shopping for Treasury payments however don’t know the way you’ll earn money? We’ll clarify.

T-bills don’t pay curiosity in the identical manner as different Treasurys. As an alternative, you purchase the payments at a reduced value and maintain them till the top of the time period. As soon as the time period ends, or reaches maturity, you obtain the face worth.

Let’s take a look at a Treasury invoice public sale to see how a Treasury invoice buy works.

On Might 15, 2024, the Treasury held an public sale for a 17-week Treasury invoice with a problem date of Might 21 and a maturity date of Sept. 17. The worth per $100 amounted to about $98.27, or an annualized low cost fee (proven as a “high rate” in TreasuryDirect) of 5.225%.

If you happen to purchased $1,000 value of T-bills on this public sale, which means you’ll have paid $982.73 on Might 15. On Sept. 17, you’d obtain $1,000, incomes $17.27 in your funding.

If you happen to have been to reinvest on this T-bill for one yr, you might arrive at an annual funding fee to your 17-week T-bill primarily based on the precise buy value of $982.73.

To discover how this works, use our T-bill calculator beneath.