When the economy and stock market are thriving, and investors have a variety of seemingly appealing options, T-bills become less appealing by comparison. After all, one of the main advantages of T-bills is their low risk to investors—but when the risk of losing money is generally thought to be lower, T-bills lose that special advantage and interest rates tend to rise. In this situation, the price of T-bills may drop if rates move higher too quickly.

Meanwhile, the interest rates set by the federal reserve can also have an impact on T-bill prices: when the rate of interest is falling, the value and price of T-bills increases. When interest rates are climbing, their value instead decreases as investors seek out higher-yield options.

Inflation can also affect the price of T-bills. High inflation can lower the real return yields for these investments. This is because they are fixed-rate investments, so the guaranteed return awaiting purchasers at the end of the bill’s maturity may have dropped in value when adjusted for inflation. If inflation is higher than expected during the life of the T-bill, than the real return is lower than the investor may have assumed when he purchased the T-bill – if inflation turns out to be lower than expected, however, the investor may receive a higher real return than assumed.

Finally, while all T-bills are sold at a discount from their face value, those with longer maturities are sold at a greater discount. T-bills with maturities at or near the one-year limit have also historically had higher yields than those with shorter maturities, though interest rates change daily and investors should always check current rates for different maturities of T-bills.

T-bills are short-term securities and have maturities of between a few weeks and a year. T-notes have maturities of between two and ten years with bi-annual interest payments. T-bonds usually mature in 20-30 years, and have historically yielded the highest returns out of these three options.

The Fed’s recent interest rate increases has made investing in T-bills particularly appealing for many investors. T-bills currently yield a return of 3.73% (as of 9/11/24) and outperform many other low-risk options, including high-yield savings accounts. Treasury Bills have a short maturity period and are backed by the full faith of the US government, making them a strong option for investors in need of a short-term and low-risk investment vehicle. In the current economic climate, T-bills also offer a higher yield return than many other investments.