Treasury Bills in short refers to Government borrowing money from its citizens for a period for which they pay back with intrest.
In most countries, it is the central bank that this task on behalf of the government.
T-bills are a way to help the government fund its operations.
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Are Treasury Bills Good Investments?
Depending on your financial goals and risk tolerance, Treasury bills can be a good investment. They are considered one of the safest investments available, backed by the full faith and credit of the most governments, meaning that you are not likely to experience losses on your initial investment. For a risk-averse investor, T-bills offer steady, albeit typically low, returns and are useful for preserving capital and maintaining liquidity.
However, their low-risk nature also means they generally provide lower yields than other investments and potentially will not keep pace with inflation over time.
What to Know About Treasury Bills
Treasury Bills are low risk investments, it has no transactional cost and interest rates are fixed are determined by the central bank at auction.
In most instances, T-Bills are sold in denominations of 100 for a period of 91, 182 and 364 days. The
How to Buy Treasury Bills
It is important to know that the number of days for the maturity of T-bills has an impact on the interest. So to begin with, first determine the number of days you want for your T-Bills. When interest rates are expected to rise, longer maturity dates pay more than shorter dates
Depending on your country here are the general requirements for Treasury Bills investment.
- A Bank account with a universal bank
- Passport size photo
- An Identification card/ Social Security number
Advantages of T-Bills as an Investment
- Zero risk
- It is easy to invest
- There is no transaction cost
Downside of Treasury Bills Investment
- T-bills can inhibit cash flow for investors who require steady income
- T-bills offer low returns compared with other debt instruments
- The T-bill pays no interest payments leading up to its maturity
Source: Glusea
