Which type of market securities generally have yields slightly higher than risk-free T-bills?

Commercial papers are short-term unsecured promissory notes issued by companies to raise funds for working capital needs. They typically carry slightly higher yields than risk-free T-bills, which are backed by the U.S. government and considered free of default risk. The reason commercial papers offer higher yields is primarily due to the higher risk involved in investing in corporate securities compared to government securities.

While T-bills are regarded as the safest form of investment, commercial papers, though generally viewed as safe, are subject to the credit risk associated with the issuing companies. As a result, investors demand a premium (higher yields) for taking on that additional risk. The yields on commercial papers fluctuate based on market conditions, the creditworthiness of the issuer, and prevailing interest rates, but they maintain a competitive yield that is often just above that of Treasury bills.

In contrast, government bonds and corporate bonds typically exhibit varying yield spreads compared to T-bills, but they represent longer-term investments and their risk profiles differ significantly. Mutual funds may invest in a variety of securities, including government bonds, corporate bonds, and commercial paper, but they do not directly fit the comparison of yields with T-bills in the same manner as commercial papers do.