How to Buy Treasury Bills in Canada

Canadian treasury bills, also known simply as T-bills, are one of many investment options that investors leverage. They’re widely known for providing low-risk and reliable returns. The Canadian government issues the T-bills to interested investors. They guarantee to pay back your principal and yields at maturity. Canadian T-bills are flexible. More specifically, they make it easy for investors to buy and sell T-bills before maturity in an open market. Also, they are a highly liquid investment option, meaning investors can buy and sell them at any time. While beneficial, purchasing Canadian T-bills can be a complex and overwhelming process, especially if you’re new to investing. Hence, this article will guide you on how to buy treasury bills in Canada. Keep reading to learn more!

How to Buy Treasury Bills in Canada

What are treasury bills?

Before we explore how to buy treasury bills in Canada, it’s important to understand what treasury bills are. Treasury bills, or simply T-bills, are short-term debt securities that mature over a timeline of four to 52 weeks, or a year. However, it doesn’t stop at a year. There are other debt securities with 1 to 3 years of maturity called treasury notes. There are also long-term debt securities of 10 years or more, which are called treasury bonds.

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T-bills are a generally risk-free investment because the Canadian government issues and backs them. This means that the government guarantees the fulfillment of the investment’s obligations. Unlike corporations, it’s highly unlikely that a government will default or go under as an operation.

When you buy treasury bills, you’re lending money to the Canadian government. At the time of maturity, the government repays your principal with interest. Usually, the selling price for T-bills is at a discount rate compared to their face value. Face value is the bill’s worth when it reaches maturity. The difference between the face value and the discount value is the interest.

To better understand treasury bills, imagine you buy a 4-week T-bill whose face value is $1,000. With a rate of 1% of $1,000, the discount price then becomes $990. At the maturity date, your interest income will be the difference between the face value and the discount price. Hence, you’ll end up getting your principal of $1,000 and your income of $10.

Does Canada sell treasury bills?

Yes, Canada sells Treasury bills, but it’s vital to know where and how to buy Treasury bills in Canada. You can buy T-bills directly from their issuer, the Bank of Canada, which is the primary purchasing source. This primary market requires investors to participate in auctions.

Another source where you can buy T-bills is the secondary market. This is where investors buy and sell already-issued Canadian T-bills from brokerage accounts. Other options for purchasing T-bills include financial institutions and investment advisors.

Related Reading: Budgeting Tips for Canadians

How much is a treasury bill in Canada?

The interest rate on treasury bills in Canada varies depending on the time and term of maturity. It is set by the Canadian government and Bank of Canada. As of October 18, 2023, Canadian T-bill rates are worth the following according to their maturities:

Generally, the Canadian government issues T-bills in amounts of $1,000, $5,000, $10,000, $25,000, $50,000, $100,000, and $1 million. Thus, the minimum investment amount for T-bills is typically $1,000. 

However, some brokers and institutions demand a minimum purchase of several thousand dollars. It’s crucial to note that these rates are dynamic and can change based on certain factors. These factors may include the economy, market conditions, and monetary policy.

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Up to $6.95 per online stock or ETF trade. Plus, there’s no minimum account balance.

Are Canadian treasury bills taxable?

Yes, the income earned on Canadian treasury bills is subject to taxation. This is because the CRA considers the T-bill income as interest income and thus is 100% taxable. Hence, you must report this income on your tax return

Interest income from T-bills is the disparity between the discounted price and the maturity value (or face value). The imposed taxes on this income vary depending on your province or territory of residence in Canada. You usually pay tax on income on a cash basis in Canada, so report the income in the year you were actually paid the interest.

On the other hand, you can also sell your purchased T-bills before maturity and get a profit (or loss). In this case, the resulting return may be subject to tax treatment as capital gain or loss.

Can I buy treasury bills on my own?

Yes, you can buy treasury bills in Canada on your own, but there may be certain parameters to follow. For instance, if you want to buy directly from the Bank of Canada, there are certain criteria you must meet. These criteria make you qualified to participate in buy-back programs or auctions. To be eligible, the individual must:

  • Be 18 years old or older;
  • Possess a valid Social Insurance Number (SIN);
  • Be a resident of Canada; and
  • Possess a Canadian bank account.

Alternatively, you can buy T-bills through an online brokerage or financial institution. They primarily require that you set up an investor’s profile on their online platform. However, much of the above conditions would still apply to open an account to facilitate the treasury bill purchase.

Can you buy a treasury bill at a bank?

Yes, many Canadian banks act as an intermediary in treasury bill purchases and sales. However, it’s important to know that Canadian banks may charge fees for their services in offering T-bills. These vary from bank to bank, but be sure to inquire before completing a transaction.

Does RBC sell T-bills?

Yes, the Royal Bank of Canada, known as RBC for short, offers Canadian T-bills as part of its diversified investment portfolio. They also provide other income products, aside from T-bills to investors. Some of these funds are GICs, corporate bonds, mutual funds, and more. This firm’s minimum purchase amount is $10,000, with a $1,000 minimum increment for Canadian T-bills.

Does CIBC sell T-bills?

Yes, the Canadian Imperial Bank of Commerce, known as CIBC for short, also sells T-bills. They maximize your investment with guaranteed principal and interest payback. Their minimum investment amount is $25,000, with a maximum of up to $200,000. Also, the CIBC only grants you access to your funds at maturity, where you get your principal and interest.

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Up to $6.95 per online stock or ETF trade. Plus, there’s no minimum account balance.

Does BMO sell treasury bills?

Yes, the Bank of Montreal (BMO) also offers Canadian treasury bills as a segment of its diversified portfolio. Aside from T-bills, BMO still offers other Canadian and U.S. securities like stocks, bonds, and T-bills.  

Does TD Bank sell treasury bonds?

Yes, the Toronto-Dominion Bank (TD Bank) is one of the major banks in Canada that offers treasury bills and bonds. They also offer other government bonds, such as Canadian federal, territorial, strip, and U.S. bonds.

How to Buy Treasury Bills in Canada

There are many options on how to buy treasury bills in Canada. You can choose to buy T-bills from the Bank of Canada, financial institutions, brokerages, and investment advisors. Each of these options may have a distinct approach. Let’s take a closer look below.

Buying from the Primary Market

This is the main approach on how to buy treasury bills in Canada. It entails buying from the Bank of Canada. Buying Canadian T-bills from the Bank of Canada may be complex, but not impossible. It’s strictly for Canadians who meet the eligibility criteria stated earlier. It begins by submitting a bid to buy the T-bill at auction. Afterward, the T-bill goes to the highest bidder. Naturally, there is some strategy and knowledge involved when placing bids.

For T-bills, the Bank of Canada usually schedules auctions every Tuesday except during holidays. For Canadian treasury bonds, the auction frequency varies. However, they often hold on a monthly or quarterly basis.

Participants in these auctions are individual investors and institutional investors. Sometimes it can be a challenge for an individual investor to compete with large institutions in the auction. This is a major challenge using this approach.

Buying from a Secondary Market

This approach constitutes the purchase of already-issued Canadian T-bills on the primary market, usually from an investor who owns them. It requires you to go through a brokerage firm on their online platform. 

Buying from a secondary market begins by opening a brokerage account, especially if you don’t already have one. After opening an account, place an order to purchase T-bills. Then select the kind of T-bill you want, its maturity date, and your desired principal.

The purchase price of a T-bill using this approach can vary based on many factors. These factors include the current interest rate and market conditions at the time of purchase. Again, some strategy is involved here to ensure you’re getting the most bang for your buck.

Pooled Investments

Alternatively, you can also buy T-bills through pooled investments like an ETF or mutual fund. These funds usually hold a diversified investment portfolio of stocks, bonds, and other securities. With T-bill ETFs and mutual funds, investors can indirectly invest in various T-bills of different maturities by pooling their money with other investors. You can access T-bills through investments like Horizons 0-3 month T-bill ETF, CIBC Canadian T-Bill Fund, and more.

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Up to $6.95 per online stock or ETF trade. Plus, there’s no minimum account balance.

How to Buy U.S. Treasury Bills in Canada

American citizens can purchase U.S. T-bills directly through Unfortunately, It’s almost impossible for Canadian citizens to participate in these purchases because you usually need to be a U.S. resident. Fortunately, Canadians can make their purchases through secondary markets or U.S. T-bill ETFs. Let’s take a closer look below.

Secondary Market

One major broker that offers U.S. T-bills in the secondary market is Interactive Brokers. It’s a unified platform where investors from over 200 countries can invest in currencies, options, stocks, futures, bonds, and more. Here’s how to buy U.S. T-bills with Interactive Brokers:

  • Open an account with Interactive Brokers.
  • Deposit funds into your account to purchase T-bills.
  • Login to their trading platform.
  • Search for U.S. Treasury bills and select the ones that fit your financial goals.
  • Place an order on the trading platform, specifying your investment amount.
  • Double-check every detail and confirm the purchase.
  • After purchase, hold and monitor T-bill performance.

U.S. Treasury Bills ETFs

Using the same Interactive Brokers platform, you can purchase U.S. Treasury Bill ETFs. Other trading platforms may allow you to access U.S. T-Bill ETFs as well. The main thing to look for is platforms that allow you to trade on American exchanges. Examples of these ETFs that offer exposure to U.S. T-bills are:

  • Horizons 0-3 Month U.S. T-Bill ETF (UBIL.U)
  • Horizons 0-3 Month T-Bill ETF (CBIL)
  • Guardian Ultra-Short U.S. T-Bill Fund (GUTB.U)

Buying U.S. T-bill ETFs on Interactive Brokers or another platform of your choosing is a straightforward procedure. It begins by creating an account or logging in. Afterward, navigate the trading platform and search for the specific U.S. T-bill ETFs you want to buy. Using funds in your account, place your orders with a specified amount. Double-check and confirm your purchase, and lastly, monitor your investment’s performance.

Related Reading: US Bond ETF in Canada

Adding Treasury Bills to Your Portfolio

If you’re searching for a low risk investment option, adding T-bills to your portfolio is a smart idea. T-bills provide your investment with stability and a guaranteed return. It preserves your capital as well, especially if you’ve diversified into high risk investments. Although they are low-risk, their investment returns are relatively low, unlike high-risk investments. Therefore, including Canadian T-bills balances your investment and diversification strategy. They also offer a secure foundation for your investment portfolio. This allows you to explore various investment options. Good luck on your investing journey!

Read More: Bond ETF vs Stock ETF: Which is better?

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