What is Treasury Bill?
Treasury Bills, or T-Bills, are short-term government securities that let people lend money to the government at a discount. They are a safe way to spend money. Treasury Bills are like IOUs or promises issued by the government. When you buy a Treasury Bill, you’re essentially lending money to the government. In return, the government promises to pay you back the full amount you lent (the face value) at a later date. However, here’s the catch: the government sells these IOUs at a discounted price. This means you pay less than the face value when you buy a Treasury Bill, and when it matures, the government pays you the full face value. The difference between what you pay and what you get back is like the interest you earn for lending your money.
Geeky Takeaways:
- T-Bills have terms that range from a few days to a year, which gives buyers with short-term financial goals a lot of options.
- T-Bills are issued by the government through regular sales. Investors can bid competitively or not competitively, which changes the prices and interest rates.
- People who prefer protection, regular returns, and easy access to cash will be interested in T-Bills. They are also good for people with short-term needs and people who want to get money when they mature.
- T-Bills are thought to be low-risk investments, but they may not give as good of results as riskier ones, and their prices can change based on things like interest rates, the economy, and events around the world.
Table of Content
- Why Government Issue Treasury Bills?
- Features of Treasury Bills
- Types of Treasury Bills
- T-Bill Maturities, Redemptions, and Interest Earned
- Purchasing T-Bill
- Example of a Treasury Bill Purchase
- Treasury Bonds vs. Treasury Notes vs. Treasury Bills
- Advantages of T-Bills
- Disadvantages of T-Bills
- What Influences T-Bill Prices?
- Who Should Consider Investing in Treasury Bills?
- Frequently Asked Questions (FAQs)