Treasury bill ladder
Also: Treasury bill ladder, T-bill ladder, Treasury ladder, bill ladder
A portfolio of Treasury bills with staggered maturity dates, typically 4, 8, 13, and 26 weeks. Provides high-yield, state-tax-free liquidity with regular maturities for cash needs.
A Treasury bill ladder is a series of T-bill purchases with staggered maturities so that a portion of the ladder matures at regular intervals. A common structure rolls one-quarter of the ladder every 13 weeks using 26-week bills, or every 4 weeks using 16-week bills. Interest on Treasuries is exempt from state and local income tax, which in California or New York produces an after-tax yield advantage over otherwise-equivalent HYSA income. T-bills can be held at TreasuryDirect or in a brokerage. Brokered T-bills can be sold before maturity in the secondary market at current prices.
Example: a California resident in the 35% federal and 10.23% state bracket holds $400,000 in a four-rung T-bill ladder yielding 4.8%. Annual interest of $19,200 avoids $1,964 of state tax that an equivalent HYSA would pay, effectively lifting the after-tax yield by 49 basis points.
Common mistake: holding T-bills in a taxable Schwab account and paying state tax by accident. The Schwab 1099-INT reports Treasury interest in Box 3, which is state-tax-free. Make sure the state return shows the subtraction.
T-bill ladders matter for cash above $250,000 FDIC limits, for California and New York residents, and for medium-term cash reserves awaiting tax payment or home purchase.