The U.S. government issues Treasury bills to fund public projects, like the construction of schools,highways, prisons, and wars. A Treasury bill is a promise to repay the investor the amount at a specified date with a specified interest rate. Treasury bills are considered one of the safest and most conservative investments by traditional investors.

The Treasury sells Treasury bills during auctions using two bidding processes: competitive and non-competitive bidding. Non-competitive bids are priced based on the average of all bids received. Treasury bills have a maturity ranging from a few days to one year.

Treasury bills are bought at a discount relative to the face value of the bill; when the treasury bill matures, the investor is paid the face value of the bill. The difference between the purchase price and face value, divided by the maturity, is the interest rate of the bill. Because the majority of an investors profits are made based on the difference between the discount and the face value of the bill, treasury bill demand can fluctuate based on the inflation rate.

Treasury bills are typically held until the maturity date, but investors may choose to exit their position before maturity in order to access the short-term interest gains and potential profit from reselling the treasury bill in the secondary market.