How to Calculate T-Bill Yields: A Beginner’s Guide to Treasury Bill Investing

Treasury Bills (T-Bills) are short-term government securities that mature in 4, 8, 13, 17, 26, or 52 weeks. They are considered one of the safest investments available because they are backed by the U.S. government. Unlike bonds, T-Bills do not pay periodic interest — instead, you buy them at a discount and receive the full face value at maturity. Understanding how to calculate T-Bill yields helps you compare them against other investments and decide which term works best for your cash needs.

How T-Bill Pricing Works

When you buy a T-Bill, you pay less than the $100 face value. The difference between what you pay and what you receive at maturity is the return. For example, if a 26-week T-Bill is auctioned at $97.50 per $100 face value, your return is $2.50 per $100 invested over 26 weeks.

The yield is expressed as an annualized percentage rate, which allows you to compare T-Bills of different maturities against each other and against other investments like savings accounts or CDs.

Three Ways to Calculate T-Bill Yields

Method	Formula	Best Used For
Discount Yield	(Discount / Face Value) × (360 / Days to Maturity)	Comparing with other discount instruments
Investment Yield	(Discount / Purchase Price) × (365 / Days to Maturity)	Comparing with coupon bonds and savings accounts
Coupon Equivalent Yield	(Discount / Purchase Price) × (365 / Days to Maturity) × 100%	SEC-standardized comparison

Real Example: 13-Week T-Bill

Let us walk through a real example. Suppose you buy a 13-week (91-day) T-Bill at an auction price of $98.75 per $100 face value:

1. Discount = $100 – $98.75 = $1.25
2. Discount Yield = ($1.25 / $100) × (360 / 91) = 0.0125 × 3.956 = 4.94%
3. Investment Yield = ($1.25 / $98.75) × (365 / 91) = 0.01266 × 4.011 = 5.08%

The investment yield (5.08%) is the more useful number because it reflects your actual return on the money you invested. As of mid-2026, 13-week T-Bills have been yielding between 4.8% and 5.2%, depending on the Federal Reserve’s rate decisions.

Why T-Bill Yields Matter for Your Portfolio

T-Bill yields serve as a benchmark for the risk-free rate of return in finance. Here is how they compare to other options in the current rate environment:

Investment	Typical Yield (2026)	Liquidity	Risk
4-Week T-Bill	4.75-5.00%	Instant (secondary market)	Virtually none
13-Week T-Bill	4.80-5.20%	Instant (secondary market)	Virtually none
26-Week T-Bill	4.60-5.10%	Instant (secondary market)	Virtually none
High-Yield Savings Account	3.50-4.50%	Instant	FDIC insured
1-Year CD	4.00-4.75%	Penalty for early withdrawal	FDIC insured

T-Bills typically offer higher yields than savings accounts and CDs while maintaining the same level of safety. The trade-off is that you need to buy them in $100 increments at auction and cannot withdraw early without selling on the secondary market (which may have a small bid-ask spread).

How to Use the T-Bill Calculator

You can calculate your exact T-Bill return using our T-Bill Yield Calculator. Enter the purchase price, face value, and days to maturity to see the discount yield, investment yield, and total dollar return instantly. You can also compare different T-Bill maturities side by side to find the best yield for your cash management needs.

Frequently Asked Questions

Do I pay state and local taxes on T-Bill interest?
No. T-Bill interest is exempt from state and local income taxes, which is a significant advantage over bank CDs and savings accounts. If you live in a high-tax state like California (13.3% top rate) or New York (10.9%), this tax advantage can add 0.5-1.0% to your effective yield.

Can I lose money on T-Bills?
Theoretically, if you sell before maturity on the secondary market, you could lose principal if interest rates have risen since your purchase. However, if you hold to maturity, you receive the full face value. The U.S. government has never defaulted on T-Bills.

How do I buy T-Bills?
Individual investors can buy T-Bills directly through TreasuryDirect.gov (no fees), through a brokerage account (Fidelity, Schwab, Vanguard), or through ETFs that hold T-Bills (like SGOV or BIL). TreasuryDirect requires a minimum of $100, while brokerages may have different minimums.

What happens when the Fed cuts rates?
When the Federal Reserve cuts the federal funds rate, T-Bill yields typically decline as well. This is why locking in longer-term T-Bills (26 or 52 weeks) can be advantageous if you expect rates to fall. Use our Compound Interest Calculator to see how reinvesting T-Bill returns over multiple quarters compounds your total return.