Help me Understand Treasury Bills

Submitted by Minions89 t3_zzjax8 in personalfinance

Looking through Fidelity for places to park cash for short-term (3 months to 2 years), I noticed that treasury bills have a nice rate of return but I do not understand them completely.

Here is an image for reference: https://postimg.cc/yg5LHVdX

The coupon is 0 and the current yield is a dash (-) but Ask Yield to worst and Maturity is 4.472%. Does that mean that you will get 4.742% return on the 6 months for the treasury bill? Pretty much like how CD works? Is there a catch somewhere?

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Mashtatoes t1_j2bzwnw wrote

You get that 4.742% as an annual rate of return (so half of that after six months).

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nozzery t1_j2c541k wrote

This is the answer. No state taxes.

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nkyguy1988 t1_j2c18gj wrote

The zero coupon just means it doesn't pay you interest. Your yield is determined by what you buy it for at a discount. You buy it for 95$ and 6 months later they return 100$. That difference is your interest. All rates are annual so, you have to calculate the fractional yield.

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penguinise t1_j2f3g5j wrote

>The coupon is 0 and the current yield is a dash (-) but Ask Yield to worst and Maturity is 4.472%. Does that mean that you will get 4.742% return on the 6 months for the treasury bill?

Treasury Bills are zero coupon, which means that they do not pay interest.

However, you normally purchase them at a discount to their face value (redemption value). In this case, you can pay $97.752 for a $100 Bill that matures on June 29, 2023. You pay $97.752 now and the Treasury pays you $100 in June.

This $2.248 of profit in six months is equivalent to a 4.742% annual yield. There is no catch - this is the going rate for the US Treasury to borrow $100 from you for six months.

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redditJ5 t1_j2c6dco wrote

I bond, is at 6%. You can only do a max of 10k/yr. Which means you can get 20k in the next 2 weeks. There are rules to it, so look it up.

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meowbeepboop t1_j2cm39r wrote

I bonds are also different from Treasury Bills and have different rules. They can both be solid options.

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