"Treasury Bills generally aren't designed to build significant wealth over the very long term — but they can be exactly what you need to protect your capital in the short term, or to bring a dose of stability to a more aggressive portfolio."
When people talk about investing, many immediately think of stocks or ETFs. Yet there are also much more stable investments used by those who mainly want to protect their capital in the short term: Government of Canada Treasury Bills, also known as Canadian T-bills.
What Is a Canadian Treasury Bill?
A Treasury Bill is a short-term debt security issued by the Government of Canada. Unlike a traditional bond, it doesn't pay monthly or annual interest. Instead, it works on a discount system.
In practice, the investor buys the Treasury Bill at a price below its face value, then receives the full value at maturity. The difference between the price paid and the amount received is the return.
For example, if someone buys a $1,000 Treasury Bill for $980, they will receive $1,000 at maturity. Their gross gain is therefore $20.
Very Short Maturities
Canadian Treasury Bills are generally offered with very short maturities. They are primarily a short-term investment.
- 1 month
- 3 months
- 6 months
- 12 months
How Can a Quebec Investor Buy Them?
In Canada, it's rare for an individual to buy Treasury Bills directly from the government. Most investors access them through one of the following options:
- An online broker like Wealthsimple or Questrade
- An ETF that holds Treasury Bills, such as CBIL.TO or TBIL.TO
- A high-interest savings account (HISA) ETF, such as CASH.TO or PSA.TO, which offers similar safety
ETFs are often the simplest route, because you can buy them directly in your TFSA or RRSP, just like any stock.
Why Some Investors Like Them
Treasury Bills are popular because they are considered very low-risk investments. Since they are issued by the Canadian government, many investors use them to preserve their capital rather than to chase strong growth.
They can be particularly appealing for:
- People who are more cautious about financial markets
- Investors who feel anxious about market swings
- Those who want to protect part of their portfolio
- People who will need their money in the coming months
- Those looking for a safe place for their emergency fund
Unlike stocks or many ETFs, Treasury Bills are far less volatile. Their return is generally known in advance, which brings a certain psychological stability to many investors. In periods of economic uncertainty, it's actually common to see investors move part of their money into safer investments like Treasury Bills.
A Word on Taxes
In Canada, income generated by Treasury Bills is treated as interest. It is therefore taxed at your full marginal tax rate, unlike Canadian dividends, which benefit from an advantageous tax credit.
"For this reason, many investors prefer to hold their Treasury Bills in a registered account like a TFSA or RRSP, to avoid the tax impact on their return."
Why Some Still Prefer Stocks or ETFs
Even though Treasury Bills are more stable, they have one important limitation: their long-term growth potential is generally much lower.
Stocks and certain ETFs can experience sharp swings, but historically they have often delivered better returns over multiple years. That's why many younger investors, or those with a longer time horizon, prefer to accept more volatility in order to maximize their portfolio's growth.
In the end, the choice mostly depends on your goal:
- Protecting your money in the short term
- Or seeking stronger growth over the long term
A Good Option for Diversifying
Personally, I think Canadian Treasury Bills can be a good alternative for people who are more cautious or anxious about the market, especially when it comes to money you might need to use soon.
They can also help diversify a portfolio by adding a more stable portion alongside more aggressive investments, or grow an emergency fund without taking on significant risk.
That said, it's important to understand that they generally aren't designed to build significant wealth over the very long term, the way certain growth ETFs or stock market investments can.
As is often the case in finance, it's not about finding "the best investment," but rather the investment that truly matches your goals, your time horizon, and your risk tolerance.
This is informational content only and does not constitute financial advice. I am not a financial planner. Consult a professional for your specific situation.