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To help finance federal spending, the Treasury sells short term debt securities known as a Treasury bill. A private investor can invest in a Treasury bill with maturities ranging from 90 to 360 days. A Treasury bill tends to be sold at weekly auctions open to public participation. A Treasury bill can also be purchased directly from a Federal Reserve Bank in denominations starting at $10,000 and rising in increments of $5,000.
A Treasury bill does not pay interest. They are sold at a discount, with the holder receiving full face value upon maturity. The larger the discount on a Treasury bill, the higher the rate of return. A $10,000 Treasury bill purchased for $9600 and maturing in 360 days, for example, carries a return of approximately four percent return.
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