Treasury bill

n.
A short-term obligation of the U.S. Treasury having a maturity period of one year or less and sold at a discount from face value.

For more information on treasury bill, visit Britannica.com.

A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations of $1,000 up to a maximum purchase of $5 million and commonly have maturities of one month (four weeks), three months (13 weeks) or six months (26 weeks).

T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder.

Investopedia Says:
For example, let's say you buy a 13-week T-bill priced at $9,800. Essentially, the U.S. government (and its nearly bulletproof credit rating) writes you an IOU for $10,000 that it agrees to pay back in three months. You will not receive regular payments as you would with a coupon bond, for example. Instead, the appreciation - and, therefore, the value to you - comes from the difference between the discounted value you originally paid and the amount you receive back ($10,000). In this case, the T-bill pays a 2.04% interest rate ($200/$9,800 = 2.04%) over a three-month period.

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U.S. Government promissory note issued by the U.S. Treasury, having a maturity period of up to one year. Notes having longer maturities are called Treasury notes, and those with very long maturities are called Treasury bonds. Treasury bills are sold at a Discount to face value, which is paid at maturity. The difference is the interest income to the owner.

Short-term U.S. Treasury security issued in minimum denominations of $10,000 and usually having maturities of 13, 26, or 52 weeks. Investors purchase bills at prices lower than face value (at discount). The return to the investor who holds it to maturity is the difference between the price paid and the face value at maturity. Treasury bills are the securities most frequently purchased or sold by the Federal Reserve when it carries out Open Market Operations.

The formula for computing the discount price on U.S. Treasury bills, which are issued at a price less than par value or face value, is as follows:

Discount in dollars = Days to Maturity / 360 x Discount Basis

Thus, a six-month Treasury bill selling at a 7% discount has a discount price of $35 per $1,000 of maturity value.

The Bond Equivalent Yield of a 180-day Treasury bill, which allows comparison with interest-bearing securities, is as follows:

Discount / Purchase Price x 365 / 180 = 7.35%

The Treasury Department also auctions from time to time short-term Cash Management Bills with maturities up to 50 days that are sold to institutional buyers in lots of $1 million or more. These have replaced Treasury certificates of indebtedness and Tax Anticipation Bills as short-term debt instruments.

A promissory note issued by the U.S. Treasury, having maturity periods up to one year. 240 F. Supp. 867, 897, n. 85. Notes maturing between one and five years are called Treasury notes and notes maturing after five years are called Treasury bonds. Treasury bills are paid in full at maturity, although they are originally sold at a discount to face value. Denominations are $10,000 or multiples thereof, with smaller denominations offered when money is in short supply. Large dollar amounts of Treasury bills, which are bearer instruments, change hands daily as an active component of money market trading.

Securities issued by the U.S. government. T-bills normally have fixed terms; that is, the purchaser cannot take possession of the accrued interest for a fixed period of time after purchase. T-bills are auctioned by the Treasury each week; the auction determines the six-month interest rate.

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