T Bill IBKR: A Comprehensive Guide to Treasury Bills

Treasury Bills, or T-Bills, are a type of short-term government securities issued by the U.S. Department of the Treasury.

T-Bills are often used by investors seeking low-risk investments with a high degree of liquidity.

They are auctioned off regularly by the U.S. Treasury, with maturities ranging from a few weeks to a year.

T-Bills are backed by the full faith and credit of the U.S. government, making them an extremely low-risk investment option.

Investors can buy T-Bills directly from the U.S. Treasury or through a brokerage firm like IBKR.

A T-Bill is a type of US Treasury debt security with a maturity of less than one year.

They are generally issued at a discount to par and carry no coupon, implying a rate of interest that the holder receives at maturity.

T-Bills are used by the government to finance short-term needs, and they are also a popular investment option for individuals and institutions.

The US Treasury issues T-Bills through Primary Dealers and to the public via Treasury Direct, making them a liquid and easily accessible investment.

T-Bills have a maturity length that determines their classification as a bill, note, or bond, with bills being the shortest-term option.

T-bills are assigned a par value, also known as face value, which is the value the bill is worth if held throughout the term.

The most common terms for T-bills are four, eight, 13, 17, 26, and 52 weeks.

You buy T-bills at a discounted price, which is below the par value.

At the end of the term, you receive the face value, which is essentially the par value.

You profit from the difference between the discounted price and the face value.

T-bills don't pay interest in the same way as other Treasurys; instead, you receive the face value at the end of the term.

Auctions for Treasury bills are an exciting way to invest in the US government's debt securities. In 2023, there were 428 public auctions for $22 trillion in Treasury debt securities.

The Treasury Department announces the details of each auction, including the date, amount, issue and maturity dates, and terms and conditions. This information is essential for investors to make informed decisions.

To participate in an auction, you can open a TreasuryDirect account, which allows you to bid on Treasury securities. Noncompetitive bids are limited to $10 million and guarantee the bidder will receive the desired amount of the auctioned security at a price set by competitive bidders.

Competitive bids, on the other hand, specify the expected discount rate, yield, or spread and may only be filled in part, or not at all. Most individual investors make noncompetitive bids, while competitive bids typically come from financial institutions.

The Treasury reviews all bids for compliance with applicable rules, and securities are deposited to investor accounts. Payment is delivered to the Treasury, and investors receive the desired amount of the auctioned security at the agreed-upon price.

Investors can buy short-term Treasury bills on TreasuryDirect, the U.S. government's portal for buying U.S. Treasuries.

Short-term Treasury bills can be bought and sold through a bank or broker.

You can purchase short-term Treasury bills directly from the U.S. government on TreasuryDirect, making it a convenient option for investors.

You can buy Treasury bills directly from the government at TreasuryDirect.gov or through a brokerage account or bank.

To buy Treasury bills, you'll need a taxpayer identification number or Social Security number, a U.S. address, and a checking or savings account to link for payment.

You can also buy Treasury bills through banks and brokerages, including ETFs, money market accounts, and the secondary market.

ETFs are bought and sold like stocks and can be held in IRAs and other tax-advantaged retirement accounts.

Some popular brokerages for buying Treasury bills include Fidelity Investments, TD Ameritrade, tastytrade, Interactive Brokers, and Charles Schwab.

Here are some key features of these brokerages:

To sell Treasury bills, you'll need to transfer them to an account with a bank, broker, or dealer, and then place an order to sell them.

The maximum amount of Treasury bills that one can buy in a single auction is $10 million if the bids are noncompetitive, or 35% of the offering amount for competitive bids.

On IBKR, you can display a US Treasury contract in the TraderWorkstation by adding the ISIN or filtering by maturity date. This allows you to locate specific bills, notes, or bonds.

To buy a US Treasury contract, you'll need to specify the quantity, which by default displays the minimum quantity that could be purchased. You can change this to your desired amount, and bonds are typically issued with a $1,000 par or face value.

From the Order Type dropdown menu, choose between Limit and Market order types, and always specify a Limit price when buying a bond.

Let's take a look at how T-bill trading works on IBKR. On May 15, 2024, the Treasury held an auction for a 17-week Treasury bill with an issue date of May 21 and a maturity date of Sept. 17.

If you bought $1,000 worth of T-bills in this auction, you would have paid $982.73 on May 15. You'd receive $1,000 on Sept. 17, earning $17.27 on your investment.

T-bills can be a great way to earn some extra cash, but they're not a get-rich-quick scheme. The annualized discount rate for this T-bill was 5.225%.

If you were to reinvest in this T-bill for one year, you could arrive at an annual investment rate for your 17-week T-bill based on the actual purchase price of $982.73.

Treasuries are a great way to diversify an investment portfolio and reduce risk. These securities are backed by the full faith and credit of the U.S. government.

You can display a specific US Treasury security by adding its ISIN to a cell in the TWS Watchlist or directly into the TWS Order Entry panel.

If you're looking for a specific maturity date, you can filter by that date to locate a certain bill, note, or bond.

The Contract Selection tool allows you to monitor multiple securities expiring within a broad date range.

To use this tool, select SMART, Notes, and Tradable from the left columns, then scroll down to the bottom of the Contract Selection array of results.

Using the CTRL and SHIFT keyboard keys, you can highlight the desired selection.

Click Add to add the selected securities to the active Watchlist and OK to close the Contract Selection tool.

Once you've added the securities to your Watchlist, you can click on a specific bond to add it to the Order Entry panel.

To create a short position in a US Treasury security, you need to identify the bill, note, or bond to sell short.

You must specify a quantity minimum of $250,000 and incremental volume of a further $250,000 to enter a short position.

Short sales would be for at least 250 bonds, with additional increments of 250 bonds.

From the Order Entry panel, click the Sell button, specify a quantity to satisfy the order minimum and incremental size, and enter a limit price before clicking Submit.

This process is similar to selling a long position, but with an additional volume qualifier.

IBKR Quant RSS is a powerful tool that allows you to easily access and analyze real-time T-Bill market data.

This tool is integrated directly into the IBKR Trader Workstation, making it simple to stay on top of market trends and make informed trading decisions.

With IBKR Quant RSS, you can receive real-time updates on T-Bill auctions and market conditions, helping you stay ahead of the curve.

You can also use this tool to monitor market sentiment and adjust your trading strategies accordingly.

IBKR Quant RSS is a valuable resource for any trader looking to stay informed and competitive in the T-Bill market.

If you're looking for alternative short-term investments, you can buy short-term Treasury bills on TreasuryDirect. Investors can buy and sell short-term Treasury bills through a bank or broker.