The Secret to Scaling Your StartupJoin us here on September 27 at 1:30pm EDT 

Go back

T-Bill Ladders Explained

Date

How to Create a Treasury Bill Ladder

You're a business owner. You've got money to invest. You're seeking a low-risk investment strategy that can offer you steady returns.

Does such a strategy even exist?

Well, buckle up, because we're about to dive head-first into the thrilling world of Treasury Bill (T-Bill) Ladders!

What are Treasury Bill Ladders?

First off, let's get some terminologies straight. You know what Treasury Bills are, right?

They are short-term securities, backed by the U.S. government, that mature within a year. Now, imagine taking multiple T-Bills with different maturity dates and arranging them in a way that they mature sequentially over time. That's a T-Bill ladder!

A T-Bill Ladder is pretty much like it sounds — a series of Treasury Bills arranged "step-by-step".

Each "step" or rung of the ladder represents a T-Bill with a different maturity date. This strategy allows you to take advantage of both short-term and long-term interest rates.

Do-it-Yourself: Constructing Your T-Bill Ladder

How can you build your T-Bill ladder?

First, you need to decide on the ladder's length. This could range from a few months to several years.

Next, you purchase T-Bills that mature at regular intervals throughout that period. The key here is to reinvest the proceeds from each matured T-Bill into a new one at the far end of your ladder. This way, you're continually rolling over your investments while ensuring a consistent inflow of cash at maturity.

Types of T-Bill Ladders

Not all T-Bill ladders are created equal. The type of ladder you choose largely depends on your investment goals and your risk tolerance.

1. Traditional Ladder: This is the most common type where T-Bills mature at regular intervals, and the proceeds are reinvested at the ladder's far end.

2. Bullet Ladder: A Bullet Ladder strategy is tailor-made for those who have a specific financial target date in mind. Imagine you're setting up a ladder, but instead of having steps at regular intervals, all the steps are at the top. That's a Bullet Ladder for you! All your T-Bills mature simultaneously on a set date, giving you a significant payout all at once. It's like setting a financial timer that goes off when you need it. Whether you're planning to buy a new home, fund a wedding, or bankroll a college education, a Bullet Ladder can help you achieve those goals with greater reliability and precision.

3. Barbell Ladder: This one has T-Bills maturing at both short-term and long-term dates.

A Barbell Ladder uses a dual-focused approach. Imagine a barbell weight – heavy on both ends and light in the middle. Your investment strategy is just like that. On one hand, you invest in short-term T-Bills, typically maturing within a year. On the other hand, you also invest in long-term T-Bills maturing in several years. The middle ground is left relatively untouched. This strategy allows you to capitalize on the typically higher interest rates of long-term T-Bills, while still maintaining liquidity with the short-term T-Bills.

The Pros and Cons of T-Bill Ladders

Just like any investment strategy, T-Bill ladders have their advantages and drawbacks.

Pros:

- Widely considered low risk: T-Bills are backed by the U.S Government, which makes them widely considered a low-risk investment.

- Steady Income: With T-Bills maturing at regular intervals, you have a consistent cash flow.

- Flexibility: You can tailor your ladder to meet your specific financial goals!

Cons:

- Lower Returns: The relative safety of T-Bills comes at a cost. Their returns can be lower than riskier investments like stocks.

- Interest Rate Risk: If interest rates fall, you could be reinvesting at lower rates. This can occur due to various factors such as changes in the monetary policy, economic recessions, or an increase in the demand for low-risk investments. If interest rates do fall, when your T-Bills mature and you reinvest the principal into new T-Bills, you'll be doing so at these lower rates. It means the yield from your ladder could diminish over time. While T-Bill ladders are an effective strategy for managing interest rate risk, they are not entirely immune to it. They work best in stable or rising interest rate environments but can present challenges when rates are on a downward trend. It's essential to consider this risk when constructing your T-Bill ladder and to diversify your investment portfolio appropriately.

Ready to Climb the Ladder?

So, are you ready to take the leap into the world of T-Bill ladders? Remember, there is no one-size-fits-all approach in investing. T-Bill ladders are just one tool in your investment toolkit.

Investing doesn't have to be a risky gamble. With T-Bill ladders, you can create a steady stream of income while minimizing risk. And that's what we call smart investing. Are you ready to get started?

Meow makes it easy for your company to purchase U.S. Treasury Bills and ladder them to your liking. Through our simple dashboard, you can select a ladder for your T-Bill positions.

This material does not constitute an offer, solicitation or recommendation to sell or an offer to buy any securities, investment products or investment advisory services. All investments involve a significant degree of risk, and there can be no assurance of investment success. Unless otherwise stated, all representations in this presentation are Meow's beliefs based on sector knowledge and/or research.


All investments involve a significant degree of risk, and there can be no assurance that Meow’s investment objectives will be achieved by any recommendations made or that any investment will be profitable. Past performance is not necessarily indicative of the future performance or the profitability of any investment in any security suggested by Meow. Nothing contained herein is or should be relied upon as a promise, representation or guarantee as to the future performance of any investment or any recommendation made by Meow.


It should not be assumed that the recommendations made by Meow now or in the future will be profitable or will equal the performance of the securities discussed here.


Registration with the SEC does not imply a certain level of skill or training.

Get started with Meow in under 10 minutes

Apply Now

Put your company's idle cash to work

TwitterLinkedIn

Resources

Legal

*Disclaimer: Meow Technologies is a financial technology company, not a depository, bank or credit union, and your account at Meow is not, itself, an FDIC-insured product.

Meow currently partners with three banking providers. Banking services are provided by Third Coast Bank SSB; Member FDIC, Grasshopper Bank, N.A; Member FDIC, and FirstBank, a Tennessee corporation.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by Grasshopper Bank, N.A, you deposit your funds into a deposit account at Grasshopper Bank, N.A. which sweeps those funds into deposit accounts across a network of FDIC-insured banks, for up to the current SMDIA of $250,000 per eligible depositor, per destination institution, for each ownership capacity or category, subject to applicable terms and conditions Grasshopper's ICS Deposit Placement Agreement. Grasshopper Bank, N.A. uses a third-party vendor and agent to help administer this sweep process. Visit https://www.intrafi.com/network-banks/ for a list of the banks and savings associations with which we/Grasshopper, N.A. have a business relationship for the placement of deposits at destination institutions, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by Grasshopper, N.A. or you). The current limit for access to FDIC insurance on your funds through your Maximum Checking account powered by Grasshopper is $125 million, subject to change at any time by Meow. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the rate sheet and are subject to change without notice. See applicable rate sheets. See our Account Agreements and other applicable terms. FDIC insurance is available to bank depositors up to $250,000 per eligible depositor, per FDIC-insured bank, per ownership capacity or category.

If you choose to open a Maximum Checking account powered by Third Coast Bank SSB, you deposit your funds into a deposit account at Third Coast Bank SSB, which sweeps those funds into deposit accounts across a network of Federal Deposit Insurance Corporation (“FDIC”)-insured banks, for up to the current standard maximum deposit insurance amount (“SMDIA”) of $250,000 per eligible depositor, per receiving bank, for each ownership capacity or category, including any other balances you may hold at that receiving bank directly or indirectly through other intermediaries, including broker-dealers. Third Coast Bank SSB uses a third-party vendor and agent to help administer this sweep process. Visit https://www.reichandtang.com/about/bank-lists/ for a list of the banks and savings associations with which we/Third Coast Bank SSB have a business relationship for the placement of deposits at receiving banks, and into which your deposits may be placed (subject to the Account Agreements with you, and any opt-outs by Third Coast Bank or you). The current limit for access to FDIC insurance on your funds through your Maximum Checking account powered by Third Coast Bank is $50 Million, subject to change at any time by Meow.

If you choose to receive banking services provided by FirstBank, a Tennessee corporation, you deposit your funds into a deposit account at FirstBank, which sweeps those funds into deposit accounts across a network of FDIC-insured banks, for up to the current SMDIA of $250,000 per eligible depositor, per destination institution, for each ownership capacity or category, subject to applicable terms and conditions, including FirstBank's ICS Deposit Placement Agreement. FirstBank uses a third-party vendor and agent to help administer this sweep process. Visit IntraFi for a list of the banks and savings associations with which FirstBank has a business relationship for the placement of deposits at destination institutions, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by FirstBank or you). The current limit for access to FDIC insurance on your funds through your Maximum Checking account powered by FirstBank is $125 million, subject to change at any time by FirstBank. Interest rates and yields are effective as per the date on the applicable rate sheet (available here) and are subject to change without notice. Refer to the applicable rate sheet for additional information. See our Account Agreements (as defined below) and other applicable terms.

FDIC insurance coverage is only available to protect you against the failure of an FDIC-insured bank that holds your deposits (and does not protect you against the failure of Meow or other third party). Terms and restrictions apply. See our Account Agreements. FDIC insurance is available to bank depositors up to $250,000 per eligible depositor, per FDIC-insured bank, per ownership capacity or category. Your account with Meow and all services provided to you are subject to the Meow Terms of Service (“Account Agreements”) and other applicable terms and no other representations or warranties, express or implied, are provided to you except as expressly set forth in those written Account Agreements. If you have any questions regarding your account, please contact team@meow.co.