Automatically Reinvesting Treasury Bills: Easy

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

It turns out automatically reinvesting Treasury Bills upon maturity is pretty straightforward, according to this TreasuryDirect link. I must say, there is a lot of information on all those government sites, but they sure make it hard to find it!

For example, for 4-week T-Bills, they both mature and issue on Thursdays. But if you set your maturing T-Bills to pay out into a Certificate of Indebtedness (C of I), and your to-be-issued T-Bill to fund from the same C of I, then the maturing T-Bill will first pay out money into the account before the 2nd one takes it out. So (most of) your money will effectively be “reinvested” into another T-Bill.

I say ‘most of’ because it seems like there will be some money left over. Since T-Bills are sold discounted and in increments of $1,000, you may pay $997 for a T-Bill worth $1000 at maturity. Then the next T-bill will also cost about $997 dollars, leaving you with a few bucks left over (your interest). So the interest doesn’t reinvest, since you can’t buy a $1003 T-Bill. Bummer. But you can just sweep that money into your Emigrant account or whatever.

What’s a Certificate of Indebtedness? It’s something that take 5 tries to type correctly (try it!). It’s also a fancy word for a non-interest-bearing account where you can hold funds to be used later to buy Treasury securities. It would be sweet if they paid some sort of interest on it, but no dice.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

User Generated Content Disclosure: Comments and/or responses are not provided or commissioned by any advertiser. Comments and/or responses have not been reviewed, approved or otherwise endorsed by any advertiser. It is not any advertiser's responsibility to ensure all posts and/or questions are answered.


  1. I set up a similar reinvestment strategy except instead of using the C of I for deposit upon maturity, I chose to always use my bank account. I figure this will keep me from having to manually go in and transfer the small amount.

    I must say thanks for the idea of the T-bill ladder. It seems prudent in this rising rate environment and keeps my chunk of money a little more liquid than throwing the whole amount into a 4-week bill.

  2. I am having trouble figuring the advantage of buying a T-Bill. If I buy a T-Bill for $997 in 4 weeks it will be worth $1006 and I will get a $6 return.Which is $78 a year. Can I not get a higher return else where?

  3. based on your incorrect calculations (997 does not become 1006), earning a 78 dollar return on 1000 is a 7.8%, which for a risk free (pretty much) investment, is darn good.

    Now to fix your original incorrect assumptions – the tbill pays an APY of just under 4% right now. Add the no state tax benefits to that and that’s equivalent to a 4.5% (approx, depending on where u live) return. Which really is pretty good if you want to keep your money liquid like a t bill ladder can do (closest is hsbc online at 4%).

  4. I thought T-bills were not exempt from federal tax. I didn’t understand what you meant by deducting your state tax from your federal tax rate. Is that why you are able to exempt federal tax?

    • Vinod Bansal says

      You have to pay federal tax on the interest earned, however, it is free of state income tax assuming you live in a state that has state income tax.

  5. The four week T-bill matures on a Thursday except I believe for the ones issued next week where the settlement date/issue date is a Friday. Will need to have extra cash to rollover the week the one issued next week matures.

  6. T-Bills are not exempt from federal tax, correct. When did I say it was?

    mc – Really? That’s annoying.

  7. See this link.

    From the Treasury Direct link you have above:

    “As long as your purchase dates always correspond with your maturity dates, your investment will continue to “rollover””

    I am assuming that the 4 week bill will mature in 28 days and not 27, thus making the maturity date on a Friday for 4 week bills issued next week. The link says that for next week the settlement date/i.e. issue date is Friday.

  8. I think the reason one might assume they were exempt from federal taxes is because your equation for determining the equivalent bank interest rates used your federal rate. But you did mentioned that T-Bills & USSB are only exempt from state and local income taxes. Just a thought…

    I just completed my first purchase of $1000 of T-Bills. I funded the purchase from my EmigrantDirect account since that is where all my 0% money is sitting. I do realize that I can’t do this too often due to the six withdrawl limit.

    Question for everyone, I have almost $50,000 in 0% BT that is currently sitting at EmigrantDirect. While 4% is great, I was hoping for something higher. Since these 0% BT offer are good for another 11 months, what would you suggest is the highest interest rate account I can get these funds into? I know I-Bonds are out of the question, so should I drop this money into more T-Bills or look at something else?


  9. Don’t worry about holiday weeks’ effect on reinvesting T-bills. The treasury thought of that already, reducing the bills term by one day on those weeks:

    “If the usual issue date of the bills is a holiday (e.g., Thanksgiving), the bills are issued the next day as 90-, 181-, and 27-day bills, respectively. If the usual maturity date of a bill is a holiday, the bill matures 1 day later.”

  10. You’re the man, Dan 🙂 I set up two purchases for next week, to test out the cancel thing. One from Emgirant, one from Prez. Can’t believe it’s already Thanksgiving.

  11. Before I purchase more T-Bills, I wanted to confirm that I am getting a better return with T-Bills than with a savings account (ex. 4% at EmigrantDirect)? I know the investment rate % for the 28-day, 91-day and 182-day T-Bills most recently was 3.997%, 4.004% and 4.345% respectively. But when you factor in the “tax situation” (which you were kind enough to provide the equation for), that is when the T-Bills are more attractive, correct?


  12. Yep, if you don’t have state or local income taxes, T-bills are not very interesting.

  13. I believe I determined that I was in a 9% state or local income tax bracket. How do I comfirm this? If that is the case, since I don’t need access to these funds for just under one year, would I be better off getting the 182-day T-Bill?


  14. I would pull up your prior year state tax return and get the effective rate (tax liability/gross income). Make sure you use the tax liability, not the tax due.

  15. I disagree, as the interest from these T-Bills would be taxed at your marginal rate, not the overall averaged rate. You might also take into account whether you itemize deductions.

  16. i’m trying to mimic/copycat the posts on t-bill laddering; just dipped my toes in by opening a TD account today…wondering what the usual processes are and average time this took for those who established theirs and has a working 28 day ladder?

    also noticed on the recent auction results page…6 and 12 day bills…anyone figured out the benefit of these instead of the 28 day ones -other than the easier liquidity [shorter time hold] but in the actual effective yields provided the recent posted yields remain about same?

    thanks for your ideas!

  17. Is there a way to set up automated ladders for 13 or 26 week t-bills? It seems like the only frequencies are weekly or biweekly. The other frequencies like monthly, quarterly, semi-annually do not align exactly to the day of the week, so they would mess up the ladder.

  18. I am thinking about purchasing t bills. If there is no state tax, how do I not report any t bill earnings? My Colorado tax is based on my federal adjusted income total and I since I wouldd be reporting any interest earned to the feds it would be taxed by the state.

  19. If I invest in a 6 month T-Bill now, will I be able to reinvest that 6 month bill into a 2 year T-Note. Assuming I use the C of I option?

Speak Your Mind