Redeem/Reinvest Treasury Bills — TreasuryDirect (2024)

FAQs

What happens when a T bill is reinvested? ›

Bills can be scheduled for reinvestment for up to two years; other eligible Treasury marketable securities can be scheduled to reinvest one time. When your bill matures, the proceeds will be reinvested or used to purchase the next available security of the same type and term as the original purchase.

To redeem your bill in TreasuryDirect you don't need to take action. If you do not provide instructions to deposit the security's principal into your C of I, we deposit the principal into your designated bank account. The deposit is made on the day your security matures.

T-bills are generally held until the maturity date or cashed out before maturity. Investors can buy T-bills in electronic form from a brokerage firm or directly from the government: Treasury Direct: New issues of T-bills can be purchased at auctions held by the government at treasurydirect.gov.

Any marketable security can be reinvested. (d) Limits on scheduling reinvestments. Reinvestments will be limited at any one time to 25 times for a 4-week bill, 7 times for a 13-week bill, 3 times for a 26-week bill, and once for all other marketable security types.

You can hold Treasury bills until they mature or sell them before they mature. To sell a bill you hold in TreasuryDirect or Legacy TreasuryDirect, first transfer the bill to a bank, broker, or dealer, then ask the bank, broker, or dealer to sell the bill for you.

Reinvestment rates are of particular concern to risk-averse investors who invest in Treasury bills (T-bills), Treasury bonds (T-bonds), municipal bonds, Certificates of Deposit (CDs), preferred stocks with a stated dividend rate, and other fixed-income investments.

The only interest payment to you occurs when your bill matures. At that time, you are paid the par amount (also called face value) of the bill.

As a result, T-bills have interest rate risk meaning there is a risk that existing bondholders might lose out on higher rates in the future. Although T-bills have zero default risk, their returns are typically lower than corporate bonds and some certificates of deposit.

Understanding Reinvestment Risk

It is the potential that the investor will be unable to reinvest cash flows at a rate comparable to their current rate of return. For example, an investor buys a 10-year $100,000 Treasury note (T-note) with an interest rate of 6%.