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A 1-Month Treasury is a short-term U.S. government debt security that matures in 30 days and offers ultra-low risk and liquidity for investors.
The 1-Month Treasury, also known as a 4-week Treasury bill (T-bill), is a short-term debt instrument issued by the U.S. Department of the Treasury. It has a maturity of 30 days and is considered one of the safest and most liquid investments available. The interest on these securities is implied in the discount to face value rather than making periodic interest payments. Investors acquire 1-Month Treasuries through a competitive or noncompetitive auction process. At maturity, the investor is paid the full face value, and the return is the difference between the purchase price and that amount. Because they are fully backed by the U.S. government and carry virtually no default risk, 1-Month T-bills are widely used as a cash equivalent or benchmark for short-term interest rates. With their extremely short duration, 1-Month Treasuries are highly sensitive to shifts in short-term interest rate policies by the Federal Reserve. Financial institutions and investment managers often rely on them for liquidity management, yield parking during volatile markets, and allocation within short-duration strategies. They are also used frequently in overnight repo markets and are a critical reference for money market returns. The yield on 1-Month Treasuries is often compared to other short-term options such as commercial paper and certificates of deposit (CDs).
Managing large pools of capital requires precision and flexibility. 1-Month Treasuries offer family offices a secure and liquid tool for short-term capital allocation. They function well within a capital preservation strategy and serve as a core component of a liquidity buffer to meet anticipated cash needs without taking undue risk. They also play a critical role in risk and laddered portfolio strategies and can be used tactically to manage interest rate exposure or park funds before reallocation. Furthermore, their predictable tax treatment (exempt from state and local income taxes) aligns with efficient tax planning practices.
A family office holds $20 million earmarked for private equity commitments expected to be drawn in 4-6 weeks. To preserve capital while optimizing short-term yield, the office invests in 1-Month Treasury bills at auction for $19.93 million. At maturity, they receive the full $20 million, earning $70,000 in yield over the period with virtually no risk.
1-Month Treasury vs. 3-Month Treasury
While both are short-term U.S. Treasury securities, a 1-Month Treasury has a shorter duration of 30 days compared to the 3-Month Treasury’s 91 days. This means the 1-Month Treasury carries lower duration risk and is more sensitive to immediate changes in interest rates, while the 3-Month Treasury typically offers slightly higher yields in stable markets due to the longer holding period.
Is the 1-Month Treasury considered a risk-free investment?
Yes, 1-Month Treasuries are generally considered risk-free in terms of default because they are backed by the full faith and credit of the U.S. government. However, investors may still face inflation risk or opportunity cost compared to higher-yielding instruments.
How can I purchase a 1-Month Treasury?
You can purchase 1-Month Treasuries through the U.S. Treasury’s online platform, TreasuryDirect.gov, or through a brokerage with access to government bond markets. Treasuries are typically auctioned weekly.
Are 1-Month Treasury returns subject to taxes?
Yes, the earnings from 1-Month Treasuries are subject to federal income tax but are exempt from state and local income taxes, making them tax-efficient for high-net-worth investors in high-tax states.