Skip to main
Todd Carlisle
I feel like a lot of people are getting the wrong impression of exactly what "yield" they're getting from Treasury Bills. So I'm writing this post to cut through the jargon so that people will have an accurate expectation of what exactly it means when they see statements like "5.3% yield based on a 26 week bill being held to maturity." Because to many smart, reasonable people it would seem as if you are getting a 5.3% return on investment every 26 weeks. But that's NOT accurate. You'll notice in the description the term "annualized." This means something that's so misleading it's borderline ridiculous. So we all know there are 52 weeks in a year. If you're buying a T-Bill with a duration of 26 weeks it's literally by definition impossible to hold that for 52 weeks right? Because the bill "matures" after 26 weeks and that's that. But when you're seeing statements like "5.3% yield annualized based on a 26 week bill" a more accurate description of that would be "you're getting 2.65% yield every 26 weeks." Annualized is such a HORRIBLY misleading way to quote the yield on an instrument that by definition cannot be held for an entire year. In fact, there's absolutely NO WAY TO KNOW what the actual annualized yield of a T-Bill with a duration of less than a year is. What do I mean by that? Well when you're getting yield quoted on a 26 week bill as "annualized" what that's actually saying is this: "If you buy this 26 week bill today and in 26 weeks from now you buy a second 26 week bill with the EXACT same interest rate as the one you're buying today you'll get 5.3% for that 52 week period." But in reality.. there's absolutely no guarantee that in 26 weeks you'll get the same rate.. so.. annualized return numbers are based on an assumption. If you buy a 26 week bill today and the "annualized" return is 5.3% that means the actual 26 week return is only 2.65%. But say when the bill you just bought matures in 26 weeks and you go to buy another 26 week bill the "annualized" yield is only 4.5% then.. well that means for that 26 week period you're only actually gaining 2.25%. So your actual 1 year yield is only 4.9% 5.3% annualized (52 weeks) 2.65% real yield (26 weeks) 4.5% annualized (52 weeks) 2.25% real yield (26 weeks) 2.65% for the first 26 weeks + 2.25% for the second 26 weeks ----------------- 4.9% actual yield for 52 weeks. So the 5.3% yield you were quoted was basically a lie. To be clear, I'm not accusing Public of being intentionally misleading. I'm accusing the entire structure of the Treasury system of being intentionally misleading. Public had nothing to do with how these yields are quoted. In their disclosure they absolutely note how the return they're quoting is annualized. So I'm not accusing Public of anything shady or nefarious. That being said. If your were to go to rent a car tomorrow and after all fees and everything included you are told the per day rate is $100 per day and you return that vehicle after 2 days you'd expect a bill of $200 right? $100 per day *2 days. What would you think if you got to the checkout counter and they told you "that'll be $36,500 annualized." I mean.. yeah.. if I rented a vehicle at $100 a day for an entire calendar year, sure.. I'd owe $100*365.. so $36,500.. but I only rented it for 2 days.. so why would I get a bill quoting rental for an additional 363 days? By definition you cannot hold a 1 month T-Bill for a year. So in what universe does it make sense to quote returns based on the assumption that you are able to purchase that 1 month bill with the same rate of return each month for a full year? So to lay this out as clearly as possible. If you're buying a 1 month T-Bill seeing a yield of 5% that does NOT mean that if you bought a T-Bill with $100 that in 30 days you'll have $105. In reality you'll only have $100.42 because that 5% yield is for a full year. To get your actual 30 day yield you'd need to divide 5% by 12 because there's 12 months in a year. That means the actual 30 day yield is 0.42% If you were to purchase a 1 month T-Bill with a 0.42% 30 day yield every month for a full year you'd end that 12 month period with a 5% return. "Well why would they tell me I'm getting 5% when I purchase something that's impossible to hold for a year, and impossible to know if the rate I get next month is higher or lower than this month?" Excellent question. I don't know. Because there's no other area I can think of where you're quoted a price beyond what you're asking for. "Yes sir I'd like to know how much a dozen eggs are" "Well, 6.5 dozen costs $45" "Yeah... Cool.. but I'm only asking about one dozen" "Well if you bought 1 dozen every month for a full year you'd pay $200" "Bro.. I don't know if I'm going to want eggs next month.. I also don't think you know exactly what they're going to cost every month for the rest of the year" "Well if you take the square root of Pi.." It's legitimately insane. I know I'm not the only person who assumed that the quoted yield applied to the actual duration of the bill. So a 3 month T-Bill with a 5.5% yield means that I'll get 5.5% every 3 months.. because that's how long the bill is good for.. But that's not how it works. I haven't seen anyone directly address this so I'm doing it. A 5.3% annualized yield means you're getting 0.44% per month. That's your actual yield. And if you continue rolling that money into buying new bills each time yours matures, and the rate is the same then as it is now, you'll end up with 5.3% after 12 months. But if the rates are higher or lower when you go to buy a new bill your annualized return will be higher or lower than 5.3% Hopefully this made sense to you and answered a question that I KNOW many people have. #treasurybill #tbillinvesting #yield //// Come join my community of fellow investors from all walks of life all learning together
Own your future.
Build your portfolio.

All of your investing.
All in one place.

Invest in stocks, treasuries, ETFs, crypto, and alternative assets on Public. Transfer your account to Public and get up to $10,000.
Sign Up
Contact Us
Check the background of this firm on FINRA’s BrokerCheck.

© Copyright 2023 Public Holdings, Inc. All Rights Reserved.

Market data powered by Xignite.

Stocks and ETFs.
Brokerage services for US-listed, registered securities are offered to self-directed customers by Open to the Public Investing, Inc. (“Open to the Public Investing”), a registered broker-dealer and member of FINRA & SIPC. Additional information about your broker can be found by clicking here. Open to Public Investing is a wholly-owned subsidiary of Public Holdings, Inc. (“Public Holdings”). This is not an offer, solicitation of an offer, or advice to buy or sell securities or open a brokerage account in any jurisdiction where Open to the Public Investing is not registered. Securities products offered by Open to the Public Investing are not FDIC insured. Apex Clearing Corporation, our clearing firm, has additional insurance coverage in excess of the regular SIPC limits. Additional information can be found here.

Alternative Assets.
Brokerage services for alternative assets available on Public are offered by Dalmore Group, LLC (“Dalmore”), member of FINRA & SIPC. “Alternative assets,” as the term is used at Public, are equity securities that have been issued pursuant to Regulation A of the Securities Act of 1933 (as amended) (“Regulation A”). This content is not investment advice. These investments are speculative, involve substantial risks (including illiquidity and loss of principal), and are not FDIC or SIPC insured. Alternative Assets purchased on the Public platform are not held in an Open to the Public Investing brokerage account and are self-custodied by the purchaser. The issuers of these securities may be an affiliate of Public, and Public (or an affiliate) may earn fees when you purchase or sell Alternative Assets. For more information on risks and conflicts of interest, see these disclosures.
An affiliate of Public may be “testing the waters” and considering making an offering of securities under Tier 2 of Regulation A. No money or other consideration is being solicited and, if sent in response, will not be accepted. No offer to buy securities can be accepted, and no part of the purchase price can be received, until an offering statement filed with the SEC has been qualified by the SEC. Any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of acceptance given after the date of qualification by the SEC or as stated in the offering materials relating to an investment opportunity, as applicable. An indication of interest to purchase securities involves no obligation or commitment of any kind.

Cryptocurrency execution and custody services are provided by Apex Crypto LLC (NMLS ID 1828849) through a software licensing agreement between Apex Crypto LLC and Public Crypto LLC. Apex Crypto is not a registered broker-dealer or a member of SIPC or FINRA. Cryptocurrencies are not securities and are not FDIC or SIPC insured. Apex Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Please ensure that you fully understand the risks involved before trading: Legal Disclosures, Apex Crypto.

U.S. Treasuries (“T-Bill“) investing services on the Public Platform are offered by Jiko Securities, Inc. (“JSI”), a registered broker-dealer and member of FINRA & SIPC. See JSI’s FINRA BrokerCheck and Form CRS for further information. When you enable T-Bill investing on the Public platform, you open a separate brokerage account with JSI (the “Treasury Account“).

JSI uses funds from your Treasury Account to purchase T-bills in increments of $100 “par value” (the T-bill’s value at maturity). T-bills are purchased at a discount to the par value and the T-bill’s yield represents the difference in price between the “par value” and the “discount price.” Aggregate funds in your Treasury Account in excess of the T-bill purchases will remain in your Treasury Account as cash. The value of T-bills fluctuate and investors may receive more or less than their original investments if sold prior to maturity. T-bills are subject to price change and availability - yield is subject to change. Past performance is not indicative of future performance. Investments in T-bills involve a variety of risks, including credit risk, interest rate risk, and liquidity risk. As a general rule, the price of a T-bills moves inversely to changes in interest rates. See Jiko U.S. Treasuries Risk Disclosures for further details.

Investments in T-bills: Not FDIC Insured; No Bank Guarantee; May Lose Value.Banking services and bank accounts are offered by Jiko Bank, a division of Mid-Central National Bank, Member FDIC. Such banking services and accounts are subject to transaction dollar amount and/or frequency limitations set forth in the Jiko Bank Account Limitations Disclosures.

JSI and Jiko Bank are not affiliated with Public Holdings, Inc. (“Public”) or any of its subsidiaries. None of these entities provide legal, tax, or accounting advice. You should consult your legal, tax, or financial advisors before making any financial decisions. This material is not intended as a recommendation, offer, or solicitation to purchase or sell securities, open a brokerage account, or engage in any investment strategy.

Commission-free trading of stocks and ETFs refers to $0 commissions for Open to the Public Investing self-directed individual cash brokerage accounts that trade the U.S.-listed, registered securities electronically during the Regular Trading Hours. Keep in mind that other fees such as regulatory fees, Premium subscription fees, commissions on trades during extended trading hours, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Open to the Public Investing’s Fee Schedule to learn more.

Fractional shares are illiquid outside of Public and not transferable. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see our Fractional Share Disclosure to learn more.

All investments involve the risk of loss and the past performance of a security or a financial product does not guarantee future results or returns.