What are treasury bills?

Nabanker


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Posted by on Saturday July 13, 2013 at 12:44:31:

Treasury bills are discounted short-term instruments used by the national or federal governments to regulate money supply or manage liquidity systems in a country. The T-bills as familiarly known, are provided through a national central bank to the public for a maturity period (not less than one year). The T-bills are regarded as one of the safest investments since they are regarded there exists the faith of the government hence carry no or less risks. In most countries, T-bills are very popular with institutional investors. The credit worthiness of national or federal governments and that of the T-bills is enhanced by the volume of investment these funds.

Some of the general features of treasury bills include the following;

1. The issuer is the national governments' central banks. In Kenya for instance, the Central Bank of Kenya (CBK) is the issuer of T-bills to the public while in Nigeria, the Federal Government through the Central Bank of Nigeria (CBN) allows for investment of as low as N100, 000.00 in the Nigerian Treasury Bills.
2. Unlike other longer term debt instruments the T-bills are offered on a discounted basis, often referred to as risk-free rates. This enables investors to earn good interests on investments.
3. The T-bills are used by the national governments to regulate the flow and circulation of money in the economy. They are also used for managing liquidity through the Open Market Operations.
4. In Nigeria and Kenya, institutions or individuals can borrow using T-bills as collateral.This is not so with some investments.
5. I most Africa's national treasury bills, the -bills qualify for liquidity ratio computation. The bills are highly liquid and can be converted into cash at any time.
6. Tenors are usually short (maximum of 365 days) and range from 91 days (3 months).
The major reasons why the governments issue T-bills is to provide a liquid investment alternative with little or no risk for individual and institutional investors and to finance development expenditure. In this position, you are like a lender to the government. The government is able to support its monetary policies in the economy when this is done right.

Investment in T-bills is considered highly safe. The payment of interest and repayment of principal is assured by the government. In Kenya, the Central Bank does this on behalf of the government.
The issuance of T-bills is according to set procedures by the central banks. In Nigeria, Kenya South Africa and most African countries, an auction is held consistently where investors go through a competitive bid (as they quote prices) before they are the T-bills. This process depends on the number of bids and a consideration on the highest and the lowest bid by individuals or institutions.

As much as treasury bills are considered safe and easier to invest in, investors run away due to some defects or disadvantages. In Kenya for instance, there has been a decline in T-bills investment because it fetches low returns. The overall yield from this investment is only good when done in long term basis. Actively trading is also sometimes affected.




Comments:
    Re: What are treasury bills? Reply by Yomi kings on Sunday September 29, 2013 at 16:35:7:

    I wil like to no more about this t-bills



    Re: What are treasury bills? Reply by morgan dennis on Wednesday December 11, 2013 at 15:26:44:

    can a nigeria buy bills from other countries and iif so what are the procedure



    Re: What are treasury bills? Reply by Felix Okoli on Wednesday December 11, 2013 at 15:26:44:

    I think so. Other countries like China buy bonds from countries like the USA.


    Re: What are treasury bills? Reply by dave on Tuesday January 7, 2014 at 11:29:37:

    on the CBN website, i noticed that interest rate for 90 day t-bills and 1 year t-bills are at least 10%, does this mean i can invest in T-bills on a 90 day basis and net 40% profit at the end of the year?(i.e. keep buying in 90 day cycles, instead of 1 year which still gives around 10%), thanks.



    Re: What are treasury bills? Reply by Felix Okoli on Tuesday January 7, 2014 at 11:29:37:

    Not exactly. Interest rates are based on an annual basis i.e. 1 year. So, this means that after 90 days, you'd only earn about 3/12 of the year's total interest since you invested for 3 months.

    Let's say someone invested N100,000 for 10% and for 90 days, at the end of 90 days, he would have made N2500.


    Re: What are treasury bills? Reply by Nonso on Thursday January 23, 2014 at 8:13:29:

    Let's say someone invested N100,000 for 10% and for 90 days, and at the end of 90 days he made N2500. At the end of that 90days will it be possible for him to withdraw both his capital (N100,000) and interest (N2500)? I mean, ending the business?



    Re: What are treasury bills? Reply by Felix Okoli on Thursday January 23, 2014 at 8:13:29:

    Yes, the contract normally expires after the agreed period.


    Re: What are treasury bills? Reply by bakare adetutu on Tuesday March 25, 2014 at 22:55:38:

    Pls can you explain better on this T-bill because i did not get it clearly.
    How do I calculate my interest on 1million for 90days. And tell me exactly d interest for 90days rate



    Re: What are treasury bills? Reply by Pst Segun Akinmosin on Thursday May 1, 2014 at 10:44:5:

    Please sir, can one hold onto TB for upto or more than 10 years but on a yearly roll over plan?





Comments:
Re: What are treasury bills? Reply by Biola on Tuesday March 24, 2015 at 14:28:47:

Pls can u tell me the amount of money supply in Nigeria as at February 2015?



Re: What are treasury bills? Reply by James on Friday June 19, 2015 at 12:47:40:

pls tell me more about the t-bill and how can i start it and where to supply



Re: What are treasury bills? Reply by comr, odey friday on Wednesday December 23, 2015 at 5:40:35:

This is a good work. Write more about commercial paper, treasury certificate and certificate of deposit.



Re: What are treasury bills? Reply by Olasiyan Bolanle on Wednesday August 3, 2016 at 14:31:44:

Please, What are the steps and procedure to start T-bills?



Re: What are treasury bills? Reply by Felix Okoli on Wednesday August 3, 2016 at 14:31:44:

Have some money in your account and apply for it at your bank




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