How to Buy Treasury Bills Through Fidelity

Treasury bills through Fidelity: what you need to know first

You can buy U.S. Treasury bills directly through a Fidelity brokerage account without paying a commission. Fidelity lets you purchase T-bills in their secondary market (bills already issued) through their trading platform, or you can bid on newly issued bills through the U.S. Treasury's auction system using Fidelity as your intermediary. The process takes a few minutes once your account is set up, and your money is held in a money market fund or cash position until the bill matures and the Treasury pays you back with interest.

Treasury bills are short-term debt instruments issued by the U.S. government, ranging from four weeks to one year in maturity. They are sold at a discount to their face value — you pay less than $10,000 upfront for a $10,000 bill, and the difference is your interest. Because they are backed by the full faith and credit of the U.S. government, they carry virtually no default risk, making them one of the safest places to park cash while earning a return.

Key Takeaways

• You need an active Fidelity brokerage account with cash available to purchase Treasury bills; you cannot buy them through a retirement account like an IRA.
• Fidelity charges no commission on Treasury bill purchases, but you will pay the bid-ask spread if buying in the secondary market.
• New Treasury bills are auctioned weekly by the U.S. Treasury, and you can place a noncompetitive bid through Fidelity to receive the average auction price.
• Treasury bill interest is subject to federal income tax but exempt from state and local income taxes.
• Your T-bill will mature and return your principal plus interest automatically; you do not need to do anything when the bill reaches its end date.

Setting up your Fidelity account for Treasury bill purchases

You will need a Fidelity brokerage account — either a standard taxable account or a specific investment account type. Treasury bills cannot be purchased through Fidelity retirement accounts such as IRAs or 401(k)s, because those accounts have their own investment rules. If you already have a Fidelity account, you can use it immediately. If not, you will need to open one online, which takes about 10 minutes and requires your Social Security number, address, and employment information.

Once your account is open, you need cash available to buy. You can transfer money from your bank account to Fidelity, which typically takes one to three business days depending on your bank. Some transfers are faster if you use Fidelity's instant funding option, though this may have limits depending on your account type. Make sure your cash is settled and available before you attempt to purchase a Treasury bill, because the purchase will fail if your account does not have sufficient funds.

Buying Treasury bills in Fidelity's secondary market

The secondary market is where Treasury bills that have already been issued trade between investors. To buy a T-bill this way, log into your Fidelity account and navigate to the Fixed Income section, then search for Treasury Bills. You will see a list of available bills with different maturity dates, current prices, and yields. The price you see is what you will pay per $10,000 of face value — for example, a bill might show a price of $9,950, meaning you pay $9,950 to receive $10,000 when it matures.

Each bill listing shows the yield to maturity, which tells you the annualized return you will earn if you hold the bill until it matures. The bid-ask spread — the difference between what buyers are willing to pay and what sellers are asking — is built into the price. Fidelity does not charge a separate commission, but you are paying the spread as part of the transaction. Shorter-maturity bills (those maturing in a few weeks) typically have tighter spreads than longer-maturity bills, so your cost is lower on bills close to their end date.

To complete the purchase, select the bill you want, enter the quantity (in $1,000 increments, with a typical minimum of $1,000), and place your order. The order executes during market hours, which are Monday through Friday, 8 a.m. to 5 p.m. Eastern time. Once filled, the bill appears in your account holdings, and your cash balance decreases by the amount you paid.

Bidding on newly issued Treasury bills through auction

The U.S. Treasury auctions new Treasury bills every week, and Fidelity allows you to place a noncompetitive bid, which means you agree to accept whatever price the auction produces. This is the simplest route for most individual investors because you do not have to guess what price to offer — you will receive the average price paid by all bidders in that auction. Competitive bidding (where you name your own price) is available through Fidelity but is typically used by institutional investors who have the tools to calculate precise pricing.

To bid on a new Treasury bill auction, go to Fidelity's Treasury auctions page and select the bill you want to bid on. The Treasury auctions bills with maturities of 4 weeks, 8 weeks, 13 weeks, 26 weeks, and 52 weeks on different days each week. You will see the auction date and the settlement date (when your money is deducted and the bill is credited to your account). Enter your noncompetitive bid before the auction deadline, which is typically 11 a.m. Eastern time on the auction day. Fidelity will hold the funds in your account and submit your bid to the Treasury.

After the auction closes, the Treasury announces the results, and Fidelity credits the bill to your account at the average auction price. You will see the bill in your holdings the next business day. Your purchase is now complete, and you simply hold the bill until maturity, at which point the Treasury automatically deposits the face value into your Fidelity cash account.

Understanding Treasury bill pricing and yields

Treasury bills are quoted differently than stocks or bonds. Instead of showing a price per share, T-bills show a discount rate or a yield. When you see a bill listed at a price of $9,950 per $10,000 face value, the yield is calculated based on how much you earn relative to what you paid and how long you hold it. A bill maturing in 13 weeks with a yield of 5.2% means that if you hold it to maturity, your annualized return will be approximately 5.2%.

The actual dollar amount you earn is the difference between what you pay and the $10,000 face value you receive at maturity. If you pay $9,950 for a bill and receive $10,000, you earn $50. The shorter the maturity, the smaller your dollar gain, because you have less time for interest to accrue. A 4-week bill might earn you only $10 on a $10,000 purchase, while a 52-week bill might earn you $200 or more, depending on current interest rates.

Current Treasury bill yields change daily based on market demand and Federal Reserve policy. When the Fed raises interest rates, new T-bill yields typically rise. When the Fed cuts rates, yields fall. Fidelity displays current yields in real time, so you can compare what different maturities are paying before you buy.

Tax treatment of Treasury bill interest

The interest you earn on Treasury bills is subject to federal income tax. You must report it on your tax return for the year in which the bill matures, even if you do not receive the money until the following year. Fidelity will send you a Form 1099-INT showing the interest earned, which you use to complete your tax filing.

Treasury bill interest is exempt from state and local income taxes. If you live in a state with a high income tax rate, this can be a meaningful benefit compared to earning the same yield in a taxable money market fund or savings account. However, the federal tax obligation remains, so Treasury bills are most advantageous for investors in high federal tax brackets who also live in high-tax states.

Managing your Treasury bills and what happens at maturity

Once you own a Treasury bill in Fidelity, you can hold it until maturity or sell it before maturity if you need the cash. To sell a bill before it matures, go to your holdings, select the bill, and place a sell order during market hours. You will receive the current market price, which may be higher or lower than what you paid depending on how interest rates have moved since your purchase. If rates have risen, the price will be lower; if rates have fallen, the price will be higher.

When your Treasury bill reaches its maturity date, the U.S. Treasury automatically deposits the face value ($10,000 per bill) into your Fidelity cash account. You do not need to do anything — the transaction is automatic. The interest you earned (the difference between what you paid and the face value) is included in that deposit. Your cash balance increases, and you can then use that money to buy another Treasury bill, transfer it to your bank, or leave it in your Fidelity account.

Fidelity displays your Treasury bills in your holdings with their maturity dates clearly marked. You can set up alerts to notify you when a bill is approaching maturity, which helps you plan what to do with the proceeds. Many investors automatically reinvest by purchasing a new bill with the same maturity length, creating a rolling ladder of Treasury bills that mature on different dates.

Frequently Asked Questions

Can I buy Treasury bills through a Fidelity IRA or 401(k)?

No. Treasury bills can only be purchased through a Fidelity taxable brokerage account. Retirement accounts have restrictions on what investments are allowed, and direct Treasury bill purchases are not among them. However, some Fidelity retirement accounts allow you to invest in Treasury bill funds or money market funds that hold T-bills.

What is the minimum amount I need to buy a Treasury bill?

The minimum purchase is typically $1,000 in the secondary market. New Treasury bill auctions through the Treasury require a minimum of $100, but Fidelity may have its own higher minimum depending on the auction. Check Fidelity's auction page for the specific minimum on the bill you want to bid on.

Do I pay any fees to buy Treasury bills through Fidelity?

Fidelity charges no commission on Treasury bill purchases. When buying in the secondary market, you pay the bid-ask spread, which is the difference between the buying and selling price. This spread is built into the price you see and is not a separate fee. Auction purchases have no spread because you receive the average auction price.

What happens if I sell a Treasury bill before it matures?

You will receive the current market price, which depends on how interest rates have changed since you bought it. If rates have risen, the price will be lower than what you paid. If rates have fallen, the price will be higher. You will see the gain or loss immediately in your Fidelity account.

How do I know which Treasury bill maturity to choose?

Choose based on when you think you will need the money. If you need cash in three months, buy a 13-week bill. If you can lock money away for a year, a 52-week bill typically pays a higher yield. Shorter bills are less sensitive to interest rate changes, while longer bills offer higher returns but more price volatility if you sell before maturity.