"Money market" names two different products. A money market account is a deposit at a bank or credit union, federally insured up to the limits. A money market fund is a mutual fund regulated by the SEC under Rule 2a-7, and not insured by the FDIC or any other government agency. A Treasury bill is neither: it is a short-term obligation of the US government. So "T-bills vs money market" is two comparisons, and each turns on different rows of the table below.
No current yield is printed here: a bill's rate is set afresh at each auction, and a fund's yield or an account's rate can change any day. Where each is published is at the end.
The three side by side
| Treasury bill | Money market fund | Money market account | |
|---|---|---|---|
| What it is | A Treasury security of a year or less, sold at a discount or at par | A mutual fund run under SEC Rule 2a-7 | A savings deposit at a bank or credit union |
| Who stands behind it | The US government's full faith and credit | The fund's portfolio; the sponsor need not cover losses | The institution, with deposit insurance behind it |
| Deposit insurance | None; the FDIC lists Treasury bills as not insured | None; the FDIC lists mutual funds as not insured | FDIC at a bank, NCUA at a credit union |
| How the yield is set | At the auction, fixed to maturity | By what the portfolio earns; quoted as a 7-day yield | By the institution |
| How often it changes | Never on a bill you hold; most terms are auctioned weekly | Continually, as holdings mature and are replaced | As often as the disclosure allows; no advance notice required |
| Getting money out | At maturity, or a sale at the market price through a bank, broker or dealer | Redeem shares; payment may not be postponed beyond seven days, save in listed exceptions | Withdraw; the institution keeps a right to seven days' notice |
| Can the value fall? | The price before maturity can; face value is paid at maturity | Yes; a $1.00 share price, where kept, is an aim, not a guarantee | No market price; insured within the limit |
| Minimum | $100, in $100 steps | Each fund's own, in its prospectus | Each institution's own, in its disclosure |
| Fees | None at TreasuryDirect; a bank or broker may charge | Annual operating expenses; possibly a liquidity fee on redemptions | Whatever the disclosure lists |
| Federal income tax | Interest; Form 1099-INT, box 3 | Dividends; Form 1099-DIV | Interest; Form 1099-INT |
| State and local income tax | Exempt by federal statute | Your state's rules decide | Outside that statute; taxed like other interest |
One name, two products
The account is a deposit. Regulation D calls it a savings deposit, naming "a money market deposit account (MMDA)", and lets the institution require seven days' written notice of a withdrawal. The FDIC insures money market deposit accounts up to $250,000 per depositor, per FDIC-insured bank, for each account ownership category. At a credit union, the National Credit Union Administration insures the account instead, under its own rules.
The fund is a security. Publication 550 draws the line: money market funds "are a type of mutual fund and should not be confused with bank money market accounts that pay interest." The SEC makes every money market fund's prospectus say that an investment in it "is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency", and, unless an affiliate has contractually committed to support the fund for at least a year, that the sponsor "is not required to reimburse the Fund for losses". A brokerage's SIPC protection treats fund shares as securities and "does not protect against the decline in value" of securities. Are money market accounts FDIC insured shows how to tell which of the two you hold, and what happened in 2008 when one large fund's price fell below a dollar.
The bill appears on the FDIC's list of products it does not insure, beside mutual funds, with a footnote that Treasury bills are backed by the full faith and credit of the U.S. government. That is a promise to pay from the borrower, not insurance on a deposit. What Treasury bills are covers the discount and the auction behind it.
What a government money market fund holds
The fund usually set against a bill is a government money market fund, which Rule 2a-7 defines as one "that invests 99.5 percent or more of its total assets in cash, government securities, and/or repurchase agreements that are collateralized fully." On an illustrative $1 billion of total assets, that leaves at most $5 million for anything else.
"Government securities" is a wider term than bills. The Investment Company Act covers any security "issued or guaranteed as to principal or interest by the United States", or by a government instrumentality acting under authority from Congress. So a government fund can hold bills, other Treasury debt, agency debt and repurchase agreements, and every money market fund must post its holdings, by category, on its website each month. Owning the fund means owning a share of that mix, not owning a bill.
The portfolio is kept short: nothing may be bought with a remaining maturity of more than 397 days, as the rule measures it (a government floating-rate security counts as maturing in one day), and the dollar-weighted average maturity may not exceed 60 days. Government funds, and retail funds limited to individual investors, may hold a stable $1.00 share price by amortised-cost accounting or penny rounding, but only "so long as the board of directors believes that they fairly reflect the market-based net asset value per share" and the fund meets the rule's other requirements. Other funds price their shares to at least the fourth decimal place, and every fund posts its market-based share value each business day. A government fund's prospectus must also say: "Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so."
How each yield is set, and how fast it moves
A bill's rate is fixed at its auction. In TreasuryDirect a buyer must bid non-competitively, naming an amount and accepting the rate the auction sets; a competitive bid needs a bank, broker or dealer. Every winner pays the same price, and the rate holds to maturity. The 4- to 26-week bills are auctioned weekly and the 52-week bill every four weeks, each auction setting a new rate. The T-bill explainer shows which of a bill's two quoted rates to set beside an APY.
A fund's yield is what its portfolio has earned. Form N-1A, the SEC form behind a fund's prospectus, computes its 7-day yield from the change in one share's value over seven days, counting only investment income and net of charges to shareholder accounts, multiplied by 365/7: one week, annualised, looking backwards. With an average maturity of 60 days at most, holdings keep maturing and are replaced at the short-term rates then on offer, and the yield moves with them.
An account's rate is the institution's decision. Regulation DD makes a bank disclose how a variable rate is determined and how often it may change, but not warn you before a cut: its 30-day notice rule for adverse changes exempts "changes in the interest rate and corresponding changes in the annual percentage yield in variable-rate accounts". CD vs money market account prices what a fixed rate is worth against that.
Locked against floating over 26 weeks (illustrative rates)
Take $10,000 for 182 days. The bill earns an illustrative 4.0% investment rate, which Treasury defines as simple interest on a 365-day year. The variable yield, standing for a fund or an account, starts at the same illustrative 4.0% and moves once, after 13 weeks.
| Illustrative path for the variable yield | Bill locked at 4.0% | Variable yield, same 182 days | Difference |
|---|---|---|---|
| Falls to 3.0% after 91 days | $199.45 | $174.52 | Bill ahead by $24.93 |
| Stays at 4.0% | $199.45 | $199.45 | None |
| Rises to 5.0% after 91 days | $199.45 | $224.38 | Variable ahead by $24.93 |
The variable figures use simple interest; daily compounding would add $1.52 to $2.52. A fund's change would arrive gradually as its holdings rolled over, narrowing the gap without reversing it. The table is symmetrical because nothing here forecasts rates: a bill removes rate risk for its own term, 52 weeks at most, and then meets whatever the next auction sets. It is also before tax; HYSA vs CD vs T-bills runs the after-tax arithmetic for a bill against a bank deposit.
Getting the money out
A bill pays face value at maturity; TreasuryDirect pays it automatically that day unless you scheduled a reinvestment, which must be in the same term. Before then the only exit is a sale through a bank, broker or dealer at the market price, normally for a fee. A bill bought in TreasuryDirect must be transferred out first, after a 45-day hold that a 4-week bill never clears. How to buy Treasury bills walks through the transfer, and a T-bill ladder puts part of the money within reach on a schedule.
A fund redeems your shares, and the Investment Company Act bars it from postponing payment "for more than seven days", apart from exceptions the Act lists. Rule 2a-7's fee requirements do not apply to a government fund, though it may choose to be able to charge one, and its prospectus then says "The Fund may impose a fee upon sale of your shares." Any other fund must charge a fee of up to 2% of the value redeemed if its board decides one is in the fund's best interests, and a fund that is neither a government nor a retail fund must generally charge one on any day net redemptions exceed 5% of net assets.
An account is a withdrawal, not a sale, so no market price is involved. Any monthly cap on transfers now comes from the deposit agreement rather than federal rule; how a money market account works has the history.
Minimums, fees and paperwork
Bills: a $100 minimum in $100 steps, up to $10 million in non-competitive bids per auction for each term. TreasuryDirect charges no fees and needs a Social Security number, a US address and a US bank account; from 29 October 2026 its only online login is ID.me. A bank or broker sets its own charges.
Funds: Form N-1A makes each fund disclose its "minimum initial or subsequent investment requirements" and print a table of "Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)".
Accounts: Regulation DD makes a bank's disclosure state any minimum balance needed to open the account, avoid a fee or earn the stated APY, and every fee. On a small balance a monthly fee can outrun the interest; money market account vs savings account shows how.
Tax: federal, then state and local
Federal. All three are taxable, save a tax-exempt fund's "exempt-interest dividends", which Publication 550 says "are not included in your taxable income"; a government fund is not that kind. A bill's discount is interest, reported in box 3 of Form 1099-INT and generally taxed in the year the bill is paid at maturity; are Treasury bills taxable covers early sales and the rest. For funds, Publication 550 is direct: "Report amounts you receive from money market funds as dividend income." The 1099-DIV instructions put those dividends in box 1a. Account interest goes on Form 1099-INT, including a credit union's so-called "dividends" on share accounts.
State and local. Federal law exempts "obligations of the United States Government" from state and local taxation, with exceptions for a corporate franchise tax and for estate or inheritance taxes, and Publication 550 says Treasury bill interest "is exempt from all state and local income taxes." That exemption covers the government's own obligations; a deposit is the institution's obligation, not the government's, so the statute does not reach an account's interest, which your state taxes as it taxes other interest. A government fund earns its income from government securities and repurchase agreements, but what reaches you is a dividend from the fund, not interest on a bill, and neither Publication 550 nor the 1099-DIV instructions say how a state treats it. Whether any part is exempt is for your state's rules and the fund's year-end tax information to settle; this page names no state and states no rule. HYSA vs CD vs T-bills puts illustrative dollars on the bill's exemption.
Where each one fits: the trade-offs
None of the three is better in general.
A Treasury bill tends to fit:
- Money needed on a known date within a year. The price is fixed at the auction, and the face value and maturity date are known in advance.
- A saver in a state with an income tax, for whom the statutory exemption is worth something.
- Someone who wants the government's own obligation rather than a share of a portfolio or a bank's promise.
Less well: money you might need on any given day, and anyone who would rather not handle maturities. Every bill ends, and TreasuryDirect reinvests only in the same term.
A government money market fund tends to fit:
- Cash inside a brokerage account waiting to be invested, with no maturity date to wait for.
- Someone who wants a yield that tracks short-term rates without buying a new bill at each auction.
Less well: money that must not fall in value in any circumstances, since the $1.00 is an aim and no government agency insures it; and a saver counting on a state exemption that depends on state rules. Money market vs high-yield savings sets out where a fund and an insured account each sit.
A money market account tends to fit:
- Insured cash you can reach directly, sometimes by cheque or card.
- Someone who wants deposit insurance specifically, within $250,000 per depositor, per institution, per ownership category.
Less well: a balance below the fee-waiver minimum or above the insurance limit at one bank, and a saver in a state with an income tax comparing it with bills on headline numbers. Where to keep an emergency fund keeps money you might need this week in insured savings, and bills, if at all, in the back portion of a large fund.
Where to read the current numbers
- Bills: each auction's results are published on TreasuryDirect, and its Treasury bills page links the recent ones. Compare using the investment rate.
- Funds: the fee table and fund type are in the prospectus, which may give a 7-day yield as of the last calendar year-end or a toll-free number for the current one; the monthly holdings and daily market-based share value are on the fund's website.
- Accounts: the rate, minimums and fees are in the account disclosure, and the FDIC's dated national average is on the money market hub.
Read all three on the same day: last week's bill result against today's account rate compares two moments as well as two products.
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