Treasury bills are short-term, low-risk investments issued by the federal government to raise funds. They're a safe option for everyday Canadians seeking short-term, secure investments and can form a valuable part of a balanced portfolio.
Canadian investors can buy treasury bills through a bank or brokerage. Individual investors cannot buy T-bills directly from the Bank of Canada.
Here, we discuss how to buy T-bills, the current Treasury bill rates in Canada, risks, alternatives, and more.
Key Takeaways
- Treasury bills in Canada can be bought through major banks and brokerages, but not directly from the Bank of Canada.
- Current annual yield rates range from 3.03% to 3.19%.
- T-bills are backed by the Canadian government, so they’re extremely low risk.
- Your return is guaranteed with T-bills, but it’s also a lower return than what other investment types may provide.
How to buy treasury bills in Canada
Treasury bills, also called T-bills, are short-term government debt securities that you can purchase at a discount and redeem for full face value at maturity.
For example, you might buy a $1,000 T-bill for $950 and receive the full $1,000 back when it matures in six months.
Here are the steps to buy treasury bills in Canada:
- Research terms and yields: Terms for treasury bills are 3 months, 6 months, or 1 year. Shorter terms typically mean faster access to funds but lower returns. Find out the current yields – a treasury bill's return depends on the discount you get at purchase, not on its face value at maturity.
- Choose where to buy: You can purchase T-bills through a financial institution or an online brokerage. Individuals cannot buy directly from the Bank of Canada. Your current bank is the most convenient but may add mark-up fees.
- Compare rates: Do the math to determine how much money you’d receive if you buy a treasury bill, after fees. For example, a $1,000 T-bill bought for $950 would yield a $50 profit – but your bank may have charged you a flat $5 fee for the transaction, so your yield would only be $45.
- Open and fund your account: Set up or log into your chosen brokerage or investment account. Transfer enough funds into the account to cover the cost of the T-bills you wish to purchase.
- Place your order: Make sure to specify the term, amount, and price when purchasing.
- Hold until maturity: To receive the full face value, you must hold your treasury bills until they mature if you want.
Where you can buy treasury bills in Canada
You can buy Treasury bills in Canada from major banks and brokerages. You can buy Treasury ETFs from Wealthsimple, but not bills. Each option offers different advantages in terms of fees, convenience, and investment process.
- Banks and credit unions: Available through major banks like RBC, TD, and BMO as well as credit unions like Vancity and Desjardins. These are easier to access and manage, but you may face fees. Plus, some banks have higher thresholds for purchasing T-bills or only offer T-bills through certain account types.
- Brokerages and advisors: Buy T-bills through online brokerages like Questrade, RBC Direct Investing, or via financial advisors. This offers you flexibility but typically triggers brokerage fees which eat into your profit.
Note that you, as an individual investor, cannot directly purchase T-bills directly from the Bank of Canada. Intermediaries buy T-bills at auction and then resell them to investors.
Who should buy treasury bills in Canada?
T-bills are safe, with low but guaranteed returns, making them ideal for short-term savers or risk-averse investors.
- Conservative investors: T-bills are ideal for people seeking low-risk, guaranteed returns without exposure to market volatility.
- New investors: T-bills allow you to start investing with a low-risk option while learning the basics of investing.
- Short-term savers: You can generate a predictable amount of money with T-bills over the short term, ideal for upcoming savings goals like buying a car. T-bills offer quick and easy access to your money.
- Tax-conscious investors: T-bills are a smart option for tax-conscious investors. They can help you avoid more volatile taxable investments, as interest income is subject to more favourable tax treatment in Canada.
- Retirees: T-bills are a safe place to park your cash and generate a tiny bit of growth. Though they don’t generate enough income to count as cash flow for most investors, T-bills make a great addition to the low-risk portion of your portfolio in retirement.
Treasury bill rate in Canada
As of January 3, 2025, the current Treasury bill rates in Canada range from 3.03% to 3.19%.
Treasury bill rates are annual yields. When purchasing the T-bill, you receive an initial discount, based on the current rate and the term you choose. Then, this initial discount becomes your return or yield at maturity when you receive back the full face value of the T-bill.
This table shows the current and previous treasury bill rates in Canada by term length:
| Term length | Current annual yield (Jan 3, 2025) | Previous annual yield (Dec 25, 2024) | Previous annual yield (Dec 4, 2024) |
|---|---|---|---|
| 1 month | 3.19% | 3.17% | 3.52% |
| 3 month | 3.16% | 3.15% | 3.35% |
| 6 month | 3.09% | 3.13% | 3.28% |
| 1 year | 3.03% | 3.12% | 3.21% |
Treasury bill rates change about every week. Variations in yield rates happen when market conditions change and in response to demand for specific terms.
The table above illustrates the significant changes that occurred when the Bank of Canada adjusted its policy interest rate on December 11, 2024. Note the bigger difference in rates between the farthest right columns (December 4 and December 25) where there was a BoC policy rate change compared to the January 3 and December 25 columns.
Cost of treasury bills in Canada
To find the cost of treasury bills in Canada, you first need to know the bill’s yield and term. This is how you calculate its discounted purchase price.
Here’s an example of the cost of a 1 year T-bill using current rates:
- Face value: $1,000
- Yield rate: 3.03%
- Term: 1 year
In this case, the total cost you pay is $970.87. You get a $29.13 discount (based on 3.03%, the 1-year yield rate) on the $1,000 face value. At maturity, you receive the full $1,000 face value.
There can be additional fees when buying through brokers or financial institutions, like price markups or transaction fees. These can reduce your overall return by a flat fee (like $5) or a percentage.
As part of the cost, remember to consider taxes. T-bill earnings are subject to income tax in Canada. So, any income you earn from T-bills is considered interest income and must be reported on your tax return.
Yield of treasury bills in Canada
The yield of treasury bills in Canada is calculated based on the annualized rates set by the Bank of Canada. In other words, the yield is the interest you’ll earn but instead of receiving it as a return on an investment, it’s built into the discount you get at the time of purchase.
Here is an example of how to calculate the yield of a 1 month T-bill using current rates:
- Face value: $1,000
- Yield rate: 3.19%
- Term: 1 month
In this case, your yield would be $2.66.
To calculate, we first apply the annual yield rate (3.19%) to $1,000 (face value of the T-bill) to get $31.90. Then, we divide $31.90 by 12 months (since your term is 1 month, not the full year) to get $2.66.
Your actual yield for this 1-month T-bill would be 0.2658%, based on a 3.19% annual yield rate.
At maturity, you would still receive the full $1,000 face value for this 1-month T-bill. However, your initial discount was much smaller at only $2.66 off the full $1,000 value. So, your final profit is much lower than it would be with a 1 year T-bill, even though 1-year yield rates are slightly lower.
Risks of buying treasury bills
T-bills are very low-risk investments because they're backed by the Canadian government. Your principal is essentially guaranteed.
The primary risk with Treasury bills is the opportunity cost.
You have the potential to earn much higher returns with more aggressive investments like stocks or mutual funds, which are more suitable for longer investment horizons.
For younger investors, this means that while T-bills are safe, they don’t offer higher growth potential since they’re lower risk.
For older investors or people with short-term goals, T-bills offer peace of mind. But for long-term growth, higher-risk options may provide greater rewards.
Alternatives to treasury bills
For variety, explore other government-backed investments and short-term securities:
- Similar risk and security: Guaranteed Investment Certificates (GICs), provincial T-bills, and short-term bonds are all similar low-risk, low-return investment options to federal Treasury bills.
To balance out your portfolio, consider alternatives that are higher risk with more long-term growth potential:
- Higher risk and potential growth: Dividend stocks, equity mutual funds, and ETFs are higher risk than T-bills but offer the potential for much bigger returns.
If flexibility and access to your cash is important to you, check out these alternatives:
- More access to cash: High Interest Savings Accounts (HISAs), Treasury bill ETFs, and money market funds give you more flexibility with withdrawing or trading your assets than with T-bills.
$75 GeniusCash + Unlimited transactions for $0 + Ding-free non-affiliated ATM usage.
$25 GeniusCash + $50 bonus for funding a new account, and $0 commissions on stocks & ETFs
$12 GeniusCash + Access trusted news coverage 24/7 + Digital and home subscription options.
$25 GeniusCash + Delicious meal choices with fresh ingredients + Front-door delivery.FAQ
Does Canada have Treasury bills?
Yes, Canada offers Treasury bills (T-bills), which are short-term, government-backed investments available in terms that range from 1 month to 1 year. You can buy them directly from your bank or from an online broker.
How to buy Treasury bills in Canada from Wealthsimple?
At the time of writing, Treasury bills are unavailable from Wealthsimple. It's possible that that Wealthsimple will provide T-bill purchases in the future, but right now you'll need to use other online brokers or purchase through your bank.
Do you have to pay taxes on treasury bills?
Any return earned from T-bill income is considered taxable income. Therefore, you must report it as income when you fill out your tax return. You'll be taxed the same as you are for all other taxable income.
What is the difference between a GIC and a Treasury bill?
Both are similar in that they lock in your money for a set term with a set return. However, Treasury bills are government-backed short-term securities whereas GICs are sold by banks. Both are safe, conservative investment options.
What is a better investment than Treasury bills?
While Treasury bills are very safe, stocks and equity ETFs are a "better" investment because you can get higher returns. If you’re balancing out a portfolio, try bonds or mutual funds, depending on your risk tolerance and goals.
Leave a comment
Comments