Households holding cash in the United States have more than one place to put it, and short-term Treasury securities sit close enough to savings accounts to be a direct alternative.
A bill is a loan with a fixed end date
A Treasury bill is short-term federal government debt sold at a discount to its face value and redeemed at face value when it matures.
The return is the difference between the two amounts rather than a periodic interest payment, and it is fixed the moment the bill is purchased.
Maturities run from a few weeks to a year, which is what places bills in the same time horizon as money a household would otherwise keep in savings.
Deposit accounts reprice at the bank's discretion
A savings account rate is set by the institution and can be changed at any time, which means the rate is variable even when it appears stable.
Banks respond to competitive and funding pressures rather than mechanically to market rates, so deposit rates often lag movements in short-term markets.
Bills price in the market continuously, so their yields reflect current conditions immediately, which is why the two can diverge for extended periods.
State tax treatment differs
Interest earned on federal government securities is generally exempt from state and local income tax, while bank interest is generally not.
The size of that difference depends entirely on the state a household files in, and it disappears in states without an income tax.
How it applies to any individual return depends on circumstances and on rules that change, which is a question for a tax professional rather than a general rule.
Liquidity works differently in each
A savings balance can generally be withdrawn on demand, subject to whatever transfer limits the institution imposes.
A bill can be sold before maturity, but the sale happens at the market price, which may be above or below what was paid depending on rates since purchase.
Held to maturity, the outcome is known at purchase. Sold early, it is not, which is the practical distinction between the two forms of access.
The risks being carried are not the same
Deposit accounts within insurance limits carry the backing of federal deposit insurance, which addresses the failure of the institution.
Treasury securities are obligations of the federal government itself, so the credit question is different in kind rather than better or worse on the same scale.
Both instruments leave the holder exposed to inflation eroding purchasing power, which is the risk that applies to any cash position regardless of where it sits.