The latest Treasury bill auction closed with solid demand, and the yields on short-term government debt are still sitting near levels that would have seemed generous a few years ago.
For anyone with cash parked in a savings account earning next to nothing, that gap is worth a look.
These are the same short-term IOUs the federal government uses to pay its bills, sold in maturities ranging from four weeks to a year.
When you buy a Treasury bill, you're lending the government money for a set stretch of time.
Instead, you buy the bill at a discount and get the full face value back when it matures.
If a $1,000 bill costs you $978 today and pays $1,000 in a few months, that $22 difference is your return.
The auction is simply the process where the government figures out what discount buyers will accept.
The appeal right now is that these are backed by the full faith and credit of the U.S. government, which makes them about as safe as it gets.
They're also exempt from state and local income tax, though you'll still owe federal tax on the earnings.
For savers who've been burned by bank fees or teaser rates that quietly expire, that combination is hard to beat.
You don't need a Wall Street broker to get in.
Anyone can buy T-bills directly through TreasuryDirect, the government's own website.
You set up an account, link a bank, and place what's called a noncompetitive bid, which basically means you accept whatever yield the auction produces.
You can also buy them through most major brokerages if you'd rather keep everything in one place.
A few things to keep in mind before you dive in.
Your money is locked up until the bill matures, so don't park your emergency fund in a four-week bill if you might need it next Tuesday.
Rates change at every auction, so the yield you see today isn't promised for next month.
And TreasuryDirect's website has a reputation for being clunky, so give yourself extra time the first go-round.
If you're comparing options, line up the after-tax yield on a T-bill against what your bank pays on a high-yield savings account.
Savings accounts keep your cash liquid and often pay competitively, while T-bills may edge ahead for money you won't touch for a few months.
Some people split the difference, keeping a cushion in savings and laddering the rest into bills that mature on a rolling schedule.
The bigger takeaway is that idle cash has options again.
For years, leaving a few thousand dollars in a checking account cost you almost nothing in lost interest.
It's worth fifteen minutes to see whether your money is working as hard as it could.
My take: T-bills aren't exciting, and that's the point.
They're a boring, reliable place to stash cash you don't need immediately, and in a world of unpredictable rates, boring has real value.
Final Thoughts
Just don't chase yield with money you might need tomorrow.