A 3-Month Treasury is a short-term U.S. government debt security that matures in 90 days and is considered a low-risk, highly liquid investment.
The 3-Month Treasury, also known as the 13-week Treasury bill or T-bill, is a debt obligation issued by the U.S. Department of the Treasury. It is part of the broader family of Treasury securities designed to finance government spending and manage national debt. These T-bills are sold at a discount from their face value, with investors receiving the full face value at maturity. The difference represents the interest earned, known as the discount rate. Because of its short maturity period—just 90 days—it offers minimal exposure to interest rate risk and is widely considered a risk-free benchmark in financial analysis. The 3-Month Treasury yield is often used as a proxy for short-term interest rates and is a key component in calculating the risk-free rate for valuation models such as the Capital Asset Pricing Model (CAPM). These securities are issued weekly through auctions and are highly liquid, meaning they can easily be bought or sold in the secondary market. Due to their high credit quality and safety, 3-Month Treasuries are heavily used by institutional investors, pension funds, and cash managers seeking capital preservation and predictable returns. In periods of economic uncertainty, the demand for short-dated Treasury securities typically increases as investors move capital into low-risk assets. As such, movements in 3-Month Treasury yields are closely watched for insights into market sentiment and monetary policy expectations.
The 3-Month Treasury plays a significant role in cash management and short-term liquidity strategies. Its yield is a key benchmark for assessing opportunity cost and setting hurdle rates for investments with similar durations. In a family office context, it is commonly used as a “parking vehicle” for excess cash while maintaining capital safety and accessibility. Its risk-free yield serves as a reference for performance evaluation, especially when comparing short-term portfolio allocations or calculating returns in relation to risk (e.g., Sharpe Ratio).
A family office has $10 million in liquid cash earmarked for deployment in private equity over the next quarter. To avoid idle capital and maintain liquidity, the CIO allocates this capital to 3-Month Treasury bills, purchasing them at $9,975,000. Upon maturity in 90 days, the office receives $10 million, effectively earning $25,000 in interest—reflecting a low-risk yield for the holding period.
3-Month Treasury vs. 90-Day Treasury
While often used interchangeably, the 3-Month Treasury and the 90-Day Treasury refer to nearly identical debt instruments issued by the U.S. government. Differences, if any, are mostly semantic or based on market jargon. Both have similar maturities (~13 weeks) and serve as short-term benchmarks for interest rate and liquidity analysis.
Is the 3-Month Treasury rate the same as a savings account interest rate?
No, the 3-Month Treasury rate is determined by U.S. government debt auctions and reflects short-term borrowing costs for the Treasury. It is considered a risk-free rate, while savings account interest rates are set by banks and reflect lending and reserve requirements.
Can family offices directly purchase 3-Month Treasury bills?
Yes, family offices can buy 3-Month Treasury bills directly through the U.S. Treasury’s platform (TreasuryDirect) or through brokerage accounts and institutional money market funds.
What happens if I sell a 3-Month Treasury before maturity?
If sold before maturity in the secondary market, the price may be higher or lower than the initial purchase price, depending on prevailing interest rates. Although generally stable, slight price fluctuations mean you could realize a small gain or loss.
