How T-Bill Auctions Work: Bids, the High Rate and the Discount

A bill pays no coupon; you buy it below face

A Treasury bill is a short-term security that matures in a year or less, and TreasuryDirect sells them “for terms ranging from four weeks to 52 weeks.” It also states the pricing convention directly: bills “are sold at a discount or at par (face value),” and “when the bill matures, you are paid its face value.”

There is no coupon along the way. TreasuryDirect puts it plainly: “For bills, ‘interest’ is the difference between what you paid and the face value you get when the bill matures.” The stated terms are 4, 6, 8, 13, 17, 26 and 52 weeks; the minimum purchase is $100, in increments of $100; interest is subject to federal tax and not to state or local tax.

Two kinds of bid, two closing times

Every auction takes both kinds of bid, and they are not variations on a theme — they are two different contracts with the Treasury.

TreasuryDirect describes the noncompetitive bidder as agreeing “to accept the discount (high) rate … determined at auction” and being “guaranteed to get the security you want in the amount you want.” The competitive bidder names a rate and takes fill risk instead.

The two types do not even close at the same time. In the results record for the 13-week bill auctioned on 2026-10-19, the noncompetitive close was 11:00 AM and the competitive close 11:30 AM. Missing the earlier deadline means your bid does not exist, however attractive the rate turns out to be.

The high rate is the stop-out, and it applies to everyone

TreasuryDirect’s description of the auction sequence is short and precise: “At the auction, Treasury first accepts all the non-competitive bids that comply with the auction rules. Then, we accept competitive bids based on their rate, yield, or discount margin (from lowest to highest) until the entire amount of the offering has been awarded. All successful bidders get the same rate, yield, or discount margin as the highest accepted bid.”

That last rate is what the results call the high rate, and what market participants usually call the stop-out. It is not an average and it is not a target; it is the marginal bid that exhausted the offering.

The consequences for a competitive bidder are set out as a three-row table on TreasuryDirect:

The record for the 2026-10-19 13-week bill is consistent with that: the accepted rates ran from a low of 3.995% to a high of 4.095%, with a median of 4.060%, and the field allottedAtHighRatePercentage reads 29.44 — the share of the demand at the high rate that was actually awarded.

Worked example: the 13-week bill auctioned on 2026-10-19

TreasuryDirect gives the formula for a bill’s price in one line:

Price = Face value (1 − (discount rate × time) / 360)

The auction record for CUSIP 912797TM9 reports a high rate of 4.095%, 91 days from issue to maturity, an issue date of 2026-10-22 and a maturity date of 2027-01-21. Set face value at $1,000 and the arithmetic is:

• Discount rate × time: 0.04095 × 91 = 3.72645.
• Divide by 360: 3.72645 ÷ 360 = 0.01035125.
• Subtract from 1: 1 − 0.01035125 = 0.98964875.
• Multiply by $1,000: 0.98964875 × 1,000 = $989.64875.

You pay $989.65 and receive $1,000 at maturity, so the interest is $10.35. Scaled to a $100 unit, the price is 98.964875 — and the record’s highPrice field for that auction reads exactly 98.964875, which is a useful check that the formula and the published result are the same calculation.

The record also reports an investment rate of 4.195%. That figure is not the discount rate, and the difference is structural:

• Discount as a fraction of the price paid: 10.35125 ÷ 989.64875 = 0.0104596.
• Annualized over 91 days on a 365-day basis: 0.0104596 × (365 ÷ 91) = 0.04195, or 4.195%.

Same bill, two rates, and the higher one is the one that describes what the buyer earned.

The auction calendar is a weekly pattern

TreasuryDirect publishes the pattern for each term, and the terms do not share a rhythm.

TreasuryDirect warns on the same page that “situations, such as Treasury’s needs, policy decisions, and Congressional action on the debt limit may change these patterns,” and that a weekend or holiday issue date moves to the next business day. Four times a year, at press conferences usually held on the first Wednesday of February, May, August and November, Treasury publishes a tentative six-month schedule.

Where the naive reading goes wrong

Quoting the discount rate as the return. 4.095% is a rate applied to face value over a 360-day year. The buyer earned 4.195%, because the discount was earned on a smaller outlay and over a 365-day convention. Two different questions, two different numbers.

Treating the price per $100 as a yield. 98.964875 is a price. The gap to face is 1.035125 on a $100 unit, which is 1.05% of the price paid over 91 days and about 4.195% annualized. The raw gap becomes a rate only after you divide by the price and by the time.

Assuming a bid at the high rate is fully filled. It is filled pro rata at best. The 29.44% figure is the auction telling you how much of that demand it took.

Believing noncompetitive means a worse price. Everyone in the auction pays the same price. The noncompetitive bidder gives up the chance to name a rate in exchange for a guaranteed fill, not in exchange for a lower price.

Reading the calendar as a promise. The pattern is published as a pattern. The debt limit, holidays and Treasury’s own financing needs all move dates, and TreasuryDirect says so on the page that publishes it.

What the primary sources do and do not say

TreasuryDirect supplies the formula, an example using a $1,000 26-week bill at a 0.145% discount rate that prices at $999.27, the order in which bids are accepted, the bid limits, and the calendar pattern. The results feed supplies the values for a specific auction: high rate, high price, median and low rate, days to maturity, offering size and the allotment percentage.

What the pages do not supply is a definition of the phrase “stop-out rate.” TreasuryDirect calls the number the high rate or high discount rate, and the market shorthand is not in its vocabulary. Nor does any of it predict a future auction: the 4.095% figure is one dated result, and the next 13-week auction clears wherever the bids put it.

Checklist

• Decide which bid type you are placing before the deadline. Noncompetitive through TreasuryDirect, competitive through a bank or dealer, and the two close at different times.
• Compute the price before you commit cash. Face × (1 − rate × days ÷ 360) gives the amount that will leave your account.
• Compare the investment rate, not the discount rate. It is the figure that matches what other short-term instruments quote.
• Check the issue date against your cash flow. The gap between auction and issue is several days, and the money is taken on issue.
• Read the tentative schedule rather than assuming the weekly pattern. TreasuryDirect states that the pattern can change.

How these sources were checked

TreasuryDirect’s Treasury Bills page at https://www.treasurydirect.gov/marketable-securities/treasury-bills/ (read 2026-10-23) supplies the terms, the discount and par pricing, the $100 minimum and $100 increment, the $10 million noncompetitive cap, the 35% competitive cap, the auction frequency and the tax treatment. Its Understanding Pricing and Interest Rates page at https://www.treasurydirect.gov/marketable-securities/understanding-pricing/ (read 2026-10-23) supplies the price formula, the 360-day convention and the $1,000 26-week worked example. Its How Auctions Work page at https://www.treasurydirect.gov/auctions/how-auctions-work/ (read 2026-10-23) supplies the order of acceptance, the single rate for all successful bidders, the bid-type limits and closing times. Its When Auctions Happen page at https://www.treasurydirect.gov/auctions/when-auctions-happen/ (read 2026-10-23) supplies the announcement, auction and issue pattern by term. The auction results feed at https://www.treasurydirect.gov/TA_WS/securities/auctioned?format=json&type=Bill&days=30 (read 2026-10-23) supplies the high rate, high price, median and low rate, days to maturity, offering amount, bid-to-cover ratio and allotment percentage for CUSIP 912797TM9.