Home / Financial / Treasury Bill Yield Calculator

Treasury Bill Yield Calculator

Calculate the mathematically true Bond Equivalent Yield (BEY) of a U.S. T-Bill, and compare it against the artificially deflated Bank Discount Yield (BDY) quoted by Wall Street.

Secondary Market Quotes

Face Value (Redemption Value)

Current Purchase Price

Time Horizon

Days to Maturity

Days

The number of calendar days left until you get the cash back.

Bond Equivalent Yield (BEY)

4.138%

Your TRUE annualized yield on invested cash.

Bank Discount Yield (BDY)

4.000%

The artificially deflated Wall Street quote.

Total Profit

$200.00

Holding Period

180 days

Yield Distortion Analysis

Yield Distortion Gap:+0.138%

Mechanics: Because BDY divides your $$200.00 profit by the larger $$10,000.00 face value, it spits out an artificially low 4.000%. BEY corrects this by dividing your profit by the actual $$9,800.00 cash you invested to generate a true 4.138% return.

Email Link Text/SMS WhatsApp

What is T-Bill Yield Mechanics: BEY vs BDY?

Unlike corporate bonds that pay out regular cash coupons, U.S. Treasury Bills (T-Bills) are Zero-Coupon Bonds. You buy them at a discount to their face value, and the US Government pays you the full face value when they mature. Because of archaic financial rules, Wall Street quotes two completely different yield numbers for the exact same T-Bill.

Mathematical Foundation

BDY = \frac{D}{F} \times \frac{360}{t}

BDY

= Bank Discount Yield. The way T-Bills are officially quoted in financial media.

D

= Discount Amount (Face Value minus Purchase Price).

F

= Face Value (The amount the government owes you at maturity).

360

= Archaic banking standard assuming 12 months of exactly 30 days.

BEY = \frac{D}{P} \times \frac{365}{t}

BEY

= Bond Equivalent Yield. The mathematically correct 'true' yield you actually earn.

P

= Purchase Price (The actual cash you surrendered out of your pocket).

365

= The actual number of calendar days in a year.

Laws & Principles

The Denominator Deception: The Bank Discount Yield (BDY) divides your profit by the Face Value of the bond. But you didn't invest the face value, you invested the discounted purchase price! By dividing by a larger denominator, BDY artificially deflates the true yield.
The 360-Day Trap: BDY also assumes the year only has 360 days. This further artificially suppresses the quoted yield.
Always Demand BEY: BEY fixes both errors. It divides your profit by the cash you actually surrendered (Purchase Price) and annualizes it using a true 365-day calendar. BEY will always be mathematically higher than BDY.

Step-by-Step Example Walkthrough

" You buy a $10,000 T-Bill for $9,800 that matures in 180 days. "

Calculate Discount (D): $10,000 - $9,800 = $200.
Calculate BDY: ($200 / $10,000) * (360 / 180) = 4.00%.
Calculate BEY: ($200 / $9,800) * (365 / 180) = 4.14%.

Final Result: The Wall Street Journal will quote this as a 4.00% yield (BDY), but your actual annualized return on your $9,800 cash investment is 4.14% (BEY).

Quick Answer: What is the true yield of a T-Bill?

The true annualized return of a Treasury Bill is the Bond Equivalent Yield (BEY), which calculates your profit based on the exact amount of cash you actually invested and a standard 365-day year. Wall Street and brokerages officially quote the Bank Discount Yield (BDY), which uses archaic math (measuring against the face value and a 360-day year) that artificially makes the yield look lower than it actually is. Use the calculator to reveal the true BEY.

The BEY vs BDY Formula — Anatomy of the Yield Distortion

BDY (Quoted Rate)

BDY = (D ÷ F) × (360 ÷ t)

BEY (True Yield)

BEY = (D ÷ P) × (365 ÷ t)

Flaw 1: Divides your profit by the total $10,000 face value. You never invested $10,000, you only invested $9,800!
Flaw 2: Annualizes using a 360-day year.
Result: Produces a falsely low percentage that hides your true return on cash.

True Return (BEY)

Fix 1: Divides your profit by exactly what you paid out of pocket (the purchase price).
Fix 2: Annualizes using a proper 365-day year.
Result: The mathematically clean, true return you actually received. Always higher than BDY.

Comparing Short vs Long Maturities

Scenario A: 4-Week T-Bill

$10,000 face value bought for $9,960 (28 days to maturity).

Total Profit: $40
Brokerage Quote (BDY): ($40 / $10,000) × (360 / 28) = 5.143%
True Yield (BEY): ($40 / $9,960) × (365 / 28) = 5.236%

→ The true yield is +0.09% higher than what the brokerage dashboard displays.

Scenario B: 52-Week T-Bill

$10,000 face value bought for $9,500 (364 days to maturity).

Total Profit: $500
Brokerage Quote (BDY): ($500 / $10,000) × (360 / 364) = 4.945%
True Yield (BEY): ($500 / $9,500) × (365 / 364) = 5.278%

→ The distortion effect grows larger with longer maturities. The 52-week BEY is a full +0.33% higher than the quoted BDY.

Treasury Bill Specifications

Duration	Auction Frequency	Common Use Case
4-Week	Weekly (Thursdays)	Checking account replacement; ultra-liquid cash parking
8-Week	Weekly (Thursdays)	Short-term expense sinking funds (taxes, tuition)
13-Week (3M)	Weekly (Mondays)	The standard benchmark for the "Risk-Free Rate"
26-Week (6M)	Weekly (Mondays)	6-month CD replacement; core emergency fund holding
52-Week (1Y)	Every 4 Weeks	Locking in yields before expected Fed rate cuts

Pro Tips & Common Mistakes

Do This

✓Remember the State Tax Exemption. T-Bill interest is completely exempt from state and local income taxes. If you live in a high-tax state like California or New York, a 5.0% T-Bill might actually be equivalent to a 5.5% or 5.6% Bank CD when factoring in the tax savings.
✓Build a T-Bill Ladder. Instead of locking all cash into a 52-week bill, divide funds into four chunks: 4-week, 8-week, 13-week, and 26-week. As each matures, roll it into a new 26-week bill. You get the higher yield of longer duration, but have cash freeing up every 4 weeks.

Avoid This

✗Do not assume TreasuryDirect is the only way to buy. TreasuryDirect.gov is government-run and difficult to navigate. You can buy new issue T-Bills at auction through Vanguard, Fidelity, Schwab, or E-Trade with no fees, and managing them in a standard brokerage is vastly superior.
✗Do not ignore the yield curve. When the yield curve is "inverted," a 4-week T-Bill will pay a higher rate than a 10-year Treasury note. During these periods, keeping cash strictly in short-duration T-Bills optimizes yield while minimizing duration (interest rate) risk.

Frequently Asked Questions

Why are T-Bills sold at a discount?

It drastically simplifies accounting. Instead of tracking partial fractions of pennies for millions of bondholders every month to mail out interest checks, the US Treasury simply says "give us $9,800 today, we will give you $10,000 in six months." The entire transaction is mathematically collapsed into two simple numbers without any intermediate coupon payments.

Can I sell a T-Bill before it matures?

Yes, if you hold them in a standard brokerage account (Fidelity, Schwab, etc.). The secondary market for U.S. Treasuries is the most liquid financial market on earth. You can sell a T-Bill at any time during market hours. You will receive the current market price, which means you earn the prorated interest for the exact number of days you held it. If you use TreasuryDirect, selling early is highly complex and requires manually transferring the bond to a broker first.

Are T-Bills safer than a High Yield Savings Account (HYSA)?

Yes. A HYSA is insured by the FDIC up to $250,000 — backed by the 'full faith and credit' of the US Government. T-Bills are direct liabilities of the US Government itself, uncapped by any insurance limit. A billionaire can put $500 million into T-Bills and experience the exact same default risk as a HYSA: zero.

How are T-Bills taxed?

The difference between what you paid and the face value is taxed as ordinary interest income at the federal level, exactly like a bank CD. However, that interest is 100% exempt from all state and local income taxes. You will receive a 1099-INT form at the end of the year from your brokerage or TreasuryDirect detailing the exact amount to report to the IRS.