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T bill yield

TBILLYIELD Function

The TBILLYIELD function in Excel calculates the yield for a Treasury bill (T-bill) based on its price. This is useful for investors to evaluate the annualized return on T-bills in financial markets.

Key Features of TBILLYIELD:

  • Computes the annual yield for a Treasury bill as a percentage.
  • Assumes a 360-day year for calculation purposes.
  • Ideal for determining the return on investment when purchasing T-bills.

Syntax:

TBILLYIELD(settlement, maturity, price)
  • settlement: The settlement date of the T-bill (the date the investor buys the bill).
    This must be a valid Excel date.
  • maturity: The maturity date of the T-bill (the date the bill is redeemed).
    This must also be a valid Excel date later than the settlement date.
  • price: The price per $100 face value of the T-bill, entered as a number (e.g., 97.50).

Examples:

  1. Basic T-Bill Yield: =TBILLYIELD(DATE(2023, 1, 1), DATE(2023, 7, 1), 97.50)
    Calculates the annualized yield for a T-bill purchased on January 1, 2023, with a price of $97.50, and maturing on July 1, 2023.
    Result: 5.02%.

  2. T-Bill with Lower Price: =TBILLYIELD(DATE(2023, 5, 1), DATE(2023, 11, 1), 96.50)
    Determines the yield for a T-bill bought at $96.50, purchased on May 1, 2023, and maturing on November 1, 2023.
    Result: 7.23%.

  3. Shorter Term T-Bill: =TBILLYIELD(DATE(2023, 8, 1), DATE(2023, 9, 1), 99.75)
    Calculates the yield for a 1-month T-bill purchased at $99.75, with a maturity of September 1, 2023.
    Result: 3.00%.

Notes:

  • The formula for the T-bill yield is based on the price and remaining term of the T-bill: 
    TBILLYIELD = ((100 − Price) / Price) × (360 / Days to Maturity)
    Where Days to Maturity is the difference in days between maturity and settlement.
  • Both settlement and maturity dates must be valid Excel dates.
  • The maturity date must always be later than the settlement date.

Tips: - Use TBILLYIELD to calculate the return on investment for Treasury bills. - Ensure input dates and prices are correct to avoid errors in Excel. - T-bills are a government-backed, low-risk investment, making them ideal for short-term saving goals.