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Short Notes on Treasury Bill

Posted by Ripon Abu Hasnat on Wednesday, June 10, 2015 | 0 comments

Treasury Bill is a Short-term (usually less than one year, typically three months) maturity promissory note issued by a national government as a primary instrument for regulating money supply and raising funds via open market operations. Issued through the country's central bank, T-bills commonly pay no explicit interest but are sold at a discount, their yield being the difference between the purchase price and the par value (also called redemption value).

This yield is closely watched by financial markets and affects the yield on municipal and corporate bonds and bank interest rates. Although their yield is lower than on other securities with similar maturities, T-bills are very popular with institutional investors because, being backed by the government's full faith and credit, they come closest to a risk free investment. It is issued first time in 1877 in the UK and in 1929 in the US.