Why would anyone buy a government security that literally promises to pay 0% interest? It sounds like the worst investment pitch imaginable.
"Give us your money." "Okay. How much interest do I get?" "Zero." "Great. Where do I sign?"
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Yet millions of investors buy Treasury bills. Banks buy them. Money-market funds buy them. Companies park cash in them. Retirees buy them. Even giant institutions with armies of analysts happily pile into them.
And the U.S. government sells hundreds of billions of dollars worth of Treasury bills on a regular basis. So something is clearly getting lost in translation.
Because when people see "Coupon: 0%," they often hear "Return: 0%." Those are not the same thing. Not even close.
The trick is sitting in the price. And once you understand that little trick, Treasury bills suddenly become much easier to understand.