Treasury bills are short-term IOUs from the government — the safest investment you can make. They mature in 4, 8, 13, 26, or 52 weeks. Like zero-coupon bonds, T-bills are sold at a discount and redeemed at face value. Buy a $1,000 T-bill for $975 and get $1,000 at maturity — the $25 difference is your return.
The US Treasury market is the largest and most liquid bond market in the world — $25+ trillion outstanding. T-bill yields serve as the benchmark "risk-free rate" in finance — virtually every valuation model, from CAPM to DCF, uses the T-bill rate as its starting point. In India, RBI issues 91-day, 182-day, and 364-day T-bills.
During market panics, investors rush to buy T-bills in a "flight to safety" — sometimes driving yields to near zero or even negative (meaning investors pay the government to hold their money). After 2022 rate hikes, T-bill yields rose above 5% — attracting trillions from money market funds and making them competitive with stocks for the first time in years.