Meow Technologies is a financial technology company, not a bank.
Advisory services are offered through Meow Advisory, LLC, an SEC-registered investment advisor. Brokerage services provided by BNY Mellon Pershing, member SIPC, through a clearing and custody relationship with Atomic Invest.
So we wrote a super simple 5-part guide:
A Treasury Bill, also known as a T-Bill, is short-term debt issued by the U.S. government to finance its operations.
T-Bills are typically issued with maturities of 4 weeks, 8 weeks, 13 weeks, 26 weeks, or 52 weeks.
When you buy a T-Bill, you're essentially lending money to the government and in return, you receive interest on your investment.
The U.S. government pays you interest when the T-Bill matures. Until the maturity date, you are accruing value but you don’t actually earn your fixed amount of interest until maturity.
For example, let's say you purchase $10 million of T-Bills with a 1-year maturity and an interest rate of 5.0%.
When the T-Bill matures, the government will pay you back the full $10 million plus $500,000 in interest.
You earn this interest regardless of changes in interest rates between purchase and maturity.
When a Treasury bill is issued, it is sold at a price lower than its face value, which is known as a discount. This discount represents the interest that the investor will earn on the Treasury bill.
If a 1-year T-Bill has a face value of $10 million and an approximate interest rate of ~5%, it will be sold at a discount of $9,500,000. At the end of the year, the investor will receive the full face value of the T-Bill, which is $10 million. The difference between the purchase price of $9,500,000 and the face value of $10 million represents the interest earned by the investor, which in this case is $500,000.
The discount to face value is essentially a way for the government to pay the interest at the end, rather than in periodic payments.
T-Bills are typically sold in denominations of $1,000 but this can vary depending on your provider. Tactically, this means that if you buy $1 million of T-Bills, you’re essentially buying 1,000 lots of $1,000 increments.
Money Market Funds
Money Market Funds are mutual funds that invest in short-term securities such as T-Bills, commercial paper, and certificates of deposit. However, money market funds are not backed by the U.S. government and sometimes hold non-government securities such as commercial paper.
Commercial paper means you are buying the debt of other businesses which is riskier than the U.S. Government.
Certificates of Deposit (CDs)
CDs are similar to T-Bills in that they are also short-term debt instruments with fixed interest rates. However, CDs are issued by banks, not the government. CDs are less liquid than T-Bills and may carry more risk.