Learning How to Read a T-Bill Quote

# Learning How to Read a T-Bill Quote

3 Min.

Understanding Treasury Bills (T-Bills) is crucial for those looking to invest in short-term debt obligations backed by the U.S. Treasury Department. These securities have a maturity of one year or less and are highly liquid with low risk. To participate in this market, it's crucial to understand T-Bill price quotes.

## Basics

U.S. Treasury bills, often called "T-bills," represent short-term debt instruments with maturities under one year. These obligations are issued by the U.S. government in \$1,000 denominations and are traded via auctions. Unlike traditional bonds, T-bills don't yield regular interest payments; instead, they are sold at a discounted price compared to their face value. Investors receive the full face value upon maturity. T-Bills are readily tradable on the secondary market through brokerage accounts. Mastering the ability to interpret and comprehend the price quotations of these highly liquid financial tools serves as the primary gateway to T-Bill trading.

## Understanding T-Bill Quotations

Here's a breakdown of the data for a three-month T-Bill dated May 21, 2023:

• Maturity: 5/31/2023
• Bid: 4.655
• Change: +0.408
• Yield: 4.632

Maturity: The "maturity" date, or "issue," signifies when the T-Bill will be redeemed, and the investor will receive the full face value. In this instance, let's assume the maturity date is 91 days from now.

Bid Price: The bid price represents the interest rate the buyer expects. Converting it into an actual price involves the following calculation: multiply the bid by 100 and the number of days until maturity, divide by 360, and then subtract that number from 10,000:

• (4.655 * 100) * 91 / 365 = \$116.06
• \$10,000-\$116.06=\$9,883.94

Thus, the buyer offers \$9,883.94 for a T-Bill maturing in 91 days with a face value of \$10,000.

Ask Price: The ask price, identical in calculation to the bid price, signifies the interest rate at which the seller is willing to part with the T-Bill. For this particular example, the seller asks for \$9,884.19 for a T-Bill set to mature in 91 days with a face value of \$10,000.

Change: The change reveals the variance from the previous bid, which, in this case, is an increase of 0.408 basis points (bps).

Yield: The yield represents the annualized rate of return if the T-Bill is held until maturity, based on the asking price. In this scenario, the yield equals 4.63 basis points, which corresponds to an annualized yield of 0.0463%.

## Conclusion

Achieving proficiency in trading Treasury bills is a straightforward endeavor. Similar to acquiring knowledge in any field, it merely necessitates a modest investment of time and effort to grasp the basics. This initiation commences with comprehending Treasury bill quotations. Once you've gained this understanding, trading Treasury bills becomes as seamless as trading equities and fixed-income securities.

T-Bill Quote