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Trading and Investment Terms

Treasury bills

Treasury bills are money market instruments issued by the Government of India as a promissory note with guaranteed repayment at a later date.

Treasury Bills, also known as T-bills are the short-term money market instrument, issued by the central bank on behalf of the government to curb temporary liquidity shortfalls. 

 

Treasury Bills Maturity Date:

  • Treasury bills, or T-bills, have a maximum maturity period of 364 days
  • At present, treasury bills are issued in three maturities — 91-day, 182-day, and 364-day. 
  • In 1997 the government also issued 14-day immediate treasury bills.

Factors that Affect Treasury Bill Prices

  1. Macroeconomic conditions
  2. Investor risk tolerance
  3. Inflation
  4. Monetary policy, and specific supply and demand conditions for T-bills.

For example:

       26-week T-bill is priced at $9,800 on issuance to pay $10,000 in six months. No interest payments are made. 

The investment return comes from the difference between the discounted value originally paid and the amount received back at maturity, or $200 ($10,000 - $9,800). 

In this case, the T-bill pays a 2.04% interest rate ($200 / $9,800 = 2.04%) for the six-month period. 

In other words, you would pay $9,800 for the T-Bill and get $10,000 back ($9,800 principal + $200 interest) in six months.

Features of Treasury Bills

  • Minimum investment 
  • Zero-coupon securities
  • Trading 
  • Yield Rate on Treasury Bills

 

 

 

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