What is a key characteristic of treasury bills?

Treasury bills, commonly referred to as T-bills, are short-term government securities that are issued by the U.S. Department of the Treasury. A key characteristic of T-bills is that they are backed by the full faith and credit of the U.S. government, making them one of the safest investment options available. This backing significantly reduces the risk of default, which is a major concern for many investors.

T-bills are typically issued with maturities ranging from a few days to one year, and they are sold at a discount to their face value. This means that while they may not provide the high returns associated with higher-risk investments such as stocks, their safety and security appeal to conservative investors or those looking to preserve capital. This characteristic of being low-risk and government-backed distinctly sets T-bills apart from other investment options and is particularly valued during times of economic uncertainty.

In contrast, treasury bills are not issued for terms longer than one year, and they do not offer returns that generally exceed those of stocks or serve as a vehicle for corporate financing. These aspects further emphasize their nature as a low-risk investment choice favored for capital preservation and liquidity.