Introduction

sUSD is the first RWA-backed synthetic stablecoin designed to secure the open internet. It is currently backed by U.S. T-Bills, providing an annual yield of approximately 4-5%. But what exactly are U.S. T-Bills? How are they issued, how is their interest determined, and who guarantees them? Let’s explore these questions in detail.

What is a T-Bill?

Definition
Treasury Bills (T-Bills) are short-term government-issued debt securities, maturing in a few weeks to one year, offering low-risk, stable returns backed by the national treasury.

How They Work
Sold at a discount, T-Bills provide returns through the difference between the purchase price and the full face value at maturity.

Purpose
Governments use T-Bills to meet short-term funding needs, while investors gain a secure, predictable return.

Issuance
The U.S. Department of the Treasury issues T-Bills electronically through regular auctions.

Basic statistics U.S. T-Bills

Market Size
Total U.S. Treasury securities (May 2024): ~$27 trillion.
T-Bill issuance (Sep 2024): $21.4 trillion (+36.4% YoY).

Treasury Bill Yields (as of Nov, 2024)
3-month: 4.52% / 6-month: 4.46% / 1-year: 4.35%
High: 15.84% (1981, anti-inflation) Low: 0.52% (2020, COVID-19 relief)

T-Bills in Stablecoins
Stablecoin market (~$$173 billion) has ~70% backed by T-Bills

What is the interest and how does it work? 

Interest
T-Bills generate interest as the difference between the purchase price and the face value received at maturity.

Interest Rate
T-Bill interest rates are determined in two ways: through auctions, where bidders base their offers on factors like inflation, economic uncertainty, and benchmark rates; and by direct government setting.

Payment on Maturity
The face value (purchase price + interest) is automatically deposited to the investor’s account upon maturity, with funds sourced from government revenue, mainly taxes.

Interest Funding Source
Interest on T-Bills is covered by U.S. government revenues, primarily from taxes. Structurally, this interest is part of the government’s debt obligations.

Example
Buying a 52-week $1,000 T-Bill for $950 means receiving $1,000 at maturity. The $50 difference is the interest earned. And this extra $50 is covered by the U.S. government. 

Why Interest Rates Matter

Economic Impact: T-Bill rates signal broader economic trends:

Borrowing Costs: Higher rates increase loan costs for mortgages, cars, and credit.

Savings & Investments: Higher rates make conservative investments like savings accounts more appealing.

Consumer Spending: High rates reduce disposable income, slowing spending and growth.

Housing: Higher mortgage rates reduce housing demand.

Inflation: High rates help control inflation by discouraging borrowing and spending.

T-Bills Around the World

Global Rates
U.S. T-Bills average 4.41%. Other countries like Russia (21.76%) and Brazil (12.03%) have higher rates due to inflation and instability . Countries with lower rates include Germany (2.66%), Japan (0.25%), and Switzerland (0.68%), reflecting stability and low-risk economies.

Japan’s Low-Rate Environment
Japan’s ultra-low interest rates, driven by long-term deflation and high trust from global markets, encourage the yen carry trade, impacting global financial markets, including crypto.

How to Purchase U.S. T-Bills

Direct Purchase
TreasuryDirect allows for direct purchases with competitive or non-competitive bids.

Indirect Purchase
Banks, brokers, and money market funds also provide access, often with fees. Tokenized T-Bills offer blockchain-based options for crypto investors. sUSD is also one of the best options for gaining exposure to T-Bills.

How T-Bills Are tokenized 

What Is Tokenization?
Converts T-Bills into digital tokens on a blockchain, making them more accessible and liquid.

Process
Asset Pool: An issuer buys and holds T-Bills, creating a pool of assets.
Token Issuance: Tokens are issued to represent shares in the T-Bill pool, allowing holders to trade on blockchain platforms.

Funding and Purchase
Users provide stablecoins (e.g., USDC), which are converted to USD by custodians
The USD is used to buy T-Bills through traditional institutions (e.g., Morgan Stanley).
Token holders have rights to principal and interest, which are distributed accordingly.