Treasury bills (T-bills) are short-term notes of debt that are issued by the federal government. They can take from one to twelve months to mature, and investors do not receive explicit interest on these assets. T-bills are purchased at a discount, and when the bill matures, investors receive the full face value.

T-bills can be very liquid, depending on maturity. Even though they are liquid, interest rates are competitive with current market rates. As the maturity of the T-bill increases, its interest rate generally increases. Required minimum balances are high, the minimum being $1,000. T-bills are very safe assets, even though they are not guaranteed by the FDIC, because they are government debt. Other benefits to T-bills include their exemption from state and local income tax; also, since T-bills are purchased at a discount and do not yield explicit interest payments, you do not pay taxes on interest until the bill matures. There are penalties for early withdrawal before maturity. Information on T-bills and how to purchase them is available from the Wall Street Journal, www.Treasurydirect.gov, and various brokerage institutions.