Buying Treasury Bills at Fidelity

You can buy Treasury bills directly through a Fidelity brokerage account using the Fidelity website or mobile app. Treasury bills (T-bills) are short-term debt issued by the U.S. Department of the Treasury, typically maturing in four weeks to one year. Fidelity lets you purchase them during the weekly auction that the Treasury Department holds, or you can buy existing T-bills from other investors on the secondary market.

The process differs slightly depending on whether you're buying new T-bills at auction or purchasing ones already issued. Both routes use the same account and the same trading platforms, but the timing and pricing work differently.

Key Takeaways

  • You need an open Fidelity brokerage account (cash or margin) to buy T-bills; retirement accounts like IRAs and 401(k)s have restrictions on T-bill purchases.
  • New T-bills are auctioned by the Treasury Department every Monday, and Fidelity lets you place bids during the auction window, usually closing at 11 a.m. Eastern time.
  • T-bills are sold at a discount to their face value, so a $10,000 bill might cost you $9,950, and you receive the full $10,000 when it matures.
  • Fidelity charges no commission to buy T-bills at auction, but you may pay a small markup if you buy existing T-bills on the secondary market.

Setting Up Your Fidelity Account for T-Bill Purchases

You need a Fidelity brokerage account to buy T-bills. This can be a standard taxable account, a money market account, or a margin account. If you hold a Fidelity IRA or 401(k), you cannot buy T-bills directly in those accounts—the Treasury Department does not allow it. Some workplace 401(k) plans offer a self-directed brokerage window that might permit T-bill purchases, but you would need to check your plan documents or contact your plan administrator.

Once your account is open and funded, you're ready to place an order. You don't need to do anything special to "set up" T-bill trading; the ability is built into any standard Fidelity brokerage account.

Buying New T-Bills at the Weekly Auction

The U.S. Treasury holds auctions for new T-bills every Monday (or the next business day if Monday is a holiday). Fidelity gives you access to these auctions through its website and mobile app. To bid on new T-bills, log into your account and navigate to the Treasury section, usually found under "Trade" or "Fixed Income."

You place your bid during the auction window, which typically closes at 11 a.m. Eastern time on auction day. You specify how many T-bills you want to buy (they come in $100 increments, with a minimum purchase of $100 and a maximum of $5 million per auction). You can bid competitively, meaning you offer a specific price, or non-competitively, meaning you accept whatever price the auction sets. Most individual investors use non-competitive bids because the price is may provide and the process is simpler.

After the auction closes, the Treasury Department announces the results, usually by 1 p.m. Eastern time. Fidelity settles the trade two business days later, and the T-bill appears in your account. You pay the discounted price (less than face value), and when the T-bill matures, you receive the full face value.

Buying Existing T-Bills on the Secondary Market

If you want to buy T-bills outside the auction window, or if you want a specific maturity date that doesn't match the Treasury's auction schedule, you can buy them from other investors on the secondary market. These are T-bills that have already been issued and are being resold.

Search for T-bills on Fidelity's trading platform the same way you would search for a stock or bond. You'll see the maturity date, current price, and yield. Fidelity may charge a small markup on secondary market trades, though the exact amount varies. Once you place an order and it fills, the T-bill settles in your account, usually within two business days.

Secondary market T-bills may cost more or less than face value depending on interest rates and how much time remains until maturity. If you hold the T-bill until maturity, you receive the full face value regardless of what you paid.

Understanding T-Bill Pricing and Discounts

T-bills are sold at a discount, meaning you pay less than the face value upfront. For example, a $10,000 T-bill might be auctioned at a price of $9,950. When the bill matures in 13 weeks, you receive $10,000. The $50 difference is your return, and it's treated as interest income for tax purposes.

The discount depends on the current interest rate environment and the length of the T-bill. Shorter T-bills (four weeks) typically have smaller discounts than longer ones (52 weeks). Fidelity shows you the discount price and the annualized yield before you confirm your purchase, so you can see exactly what you're getting.

If you buy on the secondary market, the price may be above or below the original discount price, depending on how interest rates have moved since the T-bill was first issued.

Fees and Costs for T-Bill Purchases at Fidelity

Fidelity charges no commission when you buy new T-bills at auction. This is one of the main advantages of buying directly from the Treasury through a broker like Fidelity rather than buying them yourself.

If you buy existing T-bills on the secondary market, Fidelity may charge a markup, though it is usually small—often a fraction of a percent. The exact markup depends on the specific T-bill and market conditions. You'll see the total cost before you confirm the trade.

There are no ongoing fees to hold T-bills in your Fidelity account. When the T-bill matures, the proceeds are deposited into your account automatically.

Tax Treatment of T-Bill Income

The discount you earn on a T-bill is treated as interest income for federal tax purposes. You report it on your tax return in the year the T-bill matures, not the year you purchase it. For example, if you buy a 26-week T-bill in December and it matures in June of the following year, you report the income in the year it matures.

T-bill income is subject to federal income tax but is exempt from state and local income taxes. This can make T-bills more attractive than other short-term investments if you live in a high-tax state, though the difference is usually small because T-bill yields are typically lower than other fixed-income options.

Fidelity will send you a Form 1099-INT at the end of the year showing all T-bill income earned in your account. Keep records of your purchase and maturity dates to reconcile with this form.

Frequently Asked Questions

Can I buy T-bills in my Fidelity IRA or 401(k)?

No. The Treasury Department does not permit T-bill purchases in IRAs or most 401(k) plans. Some employer 401(k) plans offer a self-directed brokerage window that might allow it, but this is rare. Check your plan documents or contact your plan administrator to confirm.

What's the minimum amount I need to buy T-bills at Fidelity?

The minimum purchase is $100, and T-bills are sold in $100 increments. You can buy as little as one $100 T-bill or as many as $5 million in a single auction, depending on your account size and the auction rules in effect that week.

How long does it take to receive my money when a T-bill matures?

When a T-bill matures, the full face value is deposited into your Fidelity account automatically. Settlement typically occurs on the maturity date or the next business day. You can then withdraw the money or reinvest it in another T-bill or security.

Can I sell a T-bill before it matures?

Yes. You can sell a T-bill on the secondary market at any time before maturity. The price you receive depends on current interest rates and how much time remains. If rates have risen since you bought it, you may receive less than you paid. If rates have fallen, you may receive more.

What happens if I miss the auction important date?

If you miss the Monday auction important date, you can still buy T-bills with the same maturity date on the secondary market, usually at a slightly higher price due to the markup. Alternatively, you can wait for the next week's auction and bid on T-bills with a different maturity date.