39035661 Ppt Treasury Bills

7/27/2019 39035661 Ppt Treasury Bills

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Treasurysecurities


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A short-term debt obligation. T-bills are sold in denominations of

$1,000 up to a maximum purchase of $5million and commonly have maturities

of one month (four weeks), three months(13 weeks) or six months (26 weeks). T-bills are issued through a competitive

bidding process at a discount from par,

which means that rather than payingfixed interest paymentslike conventional bonds, the appreciationof the bond provides the return to theholder.


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Treasury note and bonds

T-Notes and T-Bonds are quoted on thesecondary market

The 10-year Treasury note has become

the security most frequently quoted whendiscussing the performance of the U.S.government-bond market and is used toconvey the market's take on longer-term

macroeconomic expectations. Treasury bonds pay interest every six

months and mature in 30 years.
http://www.treasurydirect.gov/indiv/products/prod_tbonds_glance.htmhttp://www.treasurydirect.gov/indiv/products/prod_tbonds_glance.htmhttp://www.treasurydirect.gov/indiv/products/prod_tbonds_glance.htmhttp://www.treasurydirect.gov/indiv/products/prod_tbonds_glance.htmhttp://www.treasurydirect.gov/indiv/products/prod_tbonds_glance.htm


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Treasury inflation-protectedsecurities(TIPS)

TIPS are marketable securities whose

principal is adjusted by changes in theConsumer Price Index. TIPS payinterest every six months and are

issued with maturities of 5, 10, and 20years.
http://www.treasurydirect.gov/indiv/products/prod_tips_glance.htmhttp://www.treasurydirect.gov/indiv/products/prod_tips_glance.htmhttp://www.treasurydirect.gov/indiv/products/prod_tips_glance.htmhttp://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm


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I savings bonds

I Savings Bonds are a low-risk savingsproduct that earn interest whileprotecting you from inflation. Sold at

face value.
http://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htmhttp://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm


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EE/E savings bonds

EE/E Savings Bonds are a securesavings product that pay interestbased on current market rates for up

to 30 years. Electronic EE SavingsBonds are sold at face value inTreasury Direct. Paper EE Savings

Bonds are sold at 1/2 face value.
http://www.treasurydirect.gov/indiv/products/prod_eebonds_glance.htmhttp://www.treasurydirect.gov/indiv/products/prod_eebonds_glance.htm


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The differences between bills,notes and bonds are the length

until maturity.


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How to buy a treasury bills?
http://money.howstuffworks.com/personal-finance/banking/banking-pictures.htm


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The treasury bill can be purchasedthrough banks, through a dealer orbroker, or online from a website like

TreasuryDirect. The bills are issuedthrough an auction bidding process,which occurs weekly. Treasury bills

are now issued only in electronic form,though they used to be paper bills.
http://howstuffworks.com/framed.htm?parent=treasury-bills.htm&url=http://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htmhttp://howstuffworks.com/framed.htm?parent=treasury-bills.htm&url=http://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htm


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Purchases of T-bills

two types Competitive

non-competitive bid. Non-competitive

bidding is the simplest way to purchase atreasury bill and is what most people dowho are not experts in security trading.

In competitive bidding, is usually done by

corporations and people who reallyunderstand the supply and demand ofthe securities market.


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Treasury auctions

The U.S. Government currently auctionsTreasury bills, and notes to finance the publicdebt.

Most of the securities are bought by primarydealers which are large securities dealers; a

small amount is purchased by individualinvestors.

Bids are submitted through Treasury Director through depository institutions, theFederal Reserve Bank of New York, and the

Bureau of Public Debt. The Treasury's Bureauof Public Debt and the Federal Reserve Bankof New York offer bidding by computer toinstitutional investors such as banks, brokersand dealers.


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How treasury bills makemoney?


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All treasury bills are short-term investmentsand mature within a year from their date ofissue. The option of buying bills with maturityperiods of one month, six months or one

year. Generally, the longer the maturityperiod, the more money you will make fromyour investment. The face value of a treasurybill is called its par value, and the mostcommonly sold bills have a par between$1,000 and $10,000. The minimum amountyou can buy a bill for, though, is $100. T-billsare sold in increments of $100 up to $1million [source: TreasuryDirect].

.
http://howstuffworks.com/framed.htm?parent=treasury-bills.htm&url=http://www.treasurydirect.gov/indiv/research/indepth/tbills/res_tbill.htmhttp://howstuffworks.com/framed.htm?parent=treasury-bills.htm&url=http://www.treasurydirect.gov/indiv/research/indepth/tbills/res_tbill.htm


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The purpose of treasury bills is to help finance thenational debt. They are a way for the government tomake money from the public. People and corporationscan buy treasury bills.

There are many reasons why treasury bills are popular.Not only are they affordable enough that almost anyonecan buy one, but they offer fast returns, and they aresimple, easy to understand and very reliable. that theyare easily tradable. They can be sold on the secondarymarket and easily converted into cash.

One of the only downsides to treasury bills is that thereturns are smaller than those from many other forms ofinvestment. This is because they are so low-risk.
http://money.howstuffworks.com/debt.htmhttp://money.howstuffworks.com/currency.htmhttp://money.howstuffworks.com/currency.htmhttp://money.howstuffworks.com/debt.htm


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Top Foreign holders of U.S.

TreasuriesJuly 2009:

Holder Total

China $800.5 billion

Japan $724.5 billion

United states $220.0 billion

Caribbean Banks $193.2 billion Oil Exporters $189.2 billion

Brazil $138.1 billion

Source: the United States Treasury.[8]


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T-bills rates may rise by 5 bps

TREASURY BILL RATES are expected to move sideways at todays auction,with market players unlikely to bid low after last weeks retail bond sale.

"Market players thought the Treasury would start issuing Treasury bills only in thesecond week of October," a trader said.

"They are now speculating that the Treasury needs more money, [with the T-billsale coming so soon after the retail bond sale]. So nobody will bid low."

Treasury bill rates are expected to move up or down by five basis points (bps).The 91-day T-bill the benchmark for short-term loans fetched 3.992% at theauction last September 8 when they were last auctioned.

The six-month paper got 4.121% while the one-year paper fetched 4.375%.

The Treasury is set to sell P7 billion worth of the short-term debt papers today.The auction scheduled Tuesday last week also the last day of the retail bondsale was canceled in order to avoid settlement problems.

"The Treasury bills are an additional supply. There are questions over why the

government would borrow so soon when it just has made a large borrowing," thetrader said.

"It did not wait for the market to digest the retail bonds. [The auction] is too soon."

The government sold P114.4 billion worth of retail Treasury bonds maturing inthree, five and seven years last week.


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Real vs. Financial Assets

Real Assets: Claims on the productive capacity of the economy: land,

buildings, machinery, knowledge for producing goods, etc.

Financial Assets:

Claim on the real assets Are the following assets real or financial?

Patents

MBA education

Loan to the bank to finance the MBA


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Short Term Debt Instruments

Certificates of Deposit (CDs)Money in the Bank but different from saving account

because it has a specific maturity

Treasury bill (T-bills)Short-term debt obligations of the US government, issued tomature in up to 12 months

Commercial Papers (CPs)Short-term debt Issued by large banks and corporations with

maturities up to 270 days

LIBOR, Euro Libor, Eurodollars,etc.


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Certificate of Deposit

Certificate of DepositA certificate of deposit is a

promissory note issued by a bank. It is

a time deposit that restricts holdersfrom withdrawing funds on demand.

Although it is still possible to withdraw

the money, this action will often incur apenalty.

Source: WSJ Online


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Treasury Bills

Also known as T-bills Matures in one year or less

Do not pay interest prior tomaturity (Zero-coupon)

Sold at a discount to the par

value to create a positiveyield to maturity

Least risky investmentavailable to U.S. investors

T-Bills are commonly issuedwith maturity dates of 28, 91,

and 182 days Sold by single price auctions

held weekly

Source: WSJ Online


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LIBOR, CP

LIBOR: London InterbankOffered Rate, is the most activeinterest rate market in the world. Itis determined by rates that banksparticipating in the London moneymarket offer each other for short-term deposits. LIBOR is used indetermining the price of manyother financial derivatives,including interest rate futures,swaps and Eurodollars

Commercial Paper: Anunsecured, short-term debtinstrument issued by acorporation, typically for meetingshort-term liabilities. Maturities onnot longer than270 days.


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From WSJ

Source: WSJ Paper Edition, August 12


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Long Term Debt

Typically has a periodic coupon + face value atmaturity

Face Value (also known as the par value orprincipal) is the amount of money a holder will

get back once a bond matures. A newly issuedbond usually sells at the par value.Coupon is the amount of interest paid per period

expressed as a percentage of the face value ofthe bond

Example: 2 year 3% bond maturing on August23, 2010 with face value of $100.

Pays $1.5 Feb 09, Aug 09, Feb 10 + $101.5 inAug 10


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Common Instruments

Treasury NotesMaturity up to 10 years

Treasury BondsMaturity between 10 to 30 years

Treasury Inflation Protected SecuritiesCoupon amount is linked to the Consumer Price Index

Corporate Bonds, Municipal Bonds, Agency,

Mortgages, etc. Bond Price: For the last example, how much is the market

willing to pay for the stream of $1.5 in Feb 09, Aug 09, Feb 10+ $101.5 in Aug 1. You will see how to price this in latersessions


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Treasury Notes and Bills

Has a coupon value paid everysix months

At maturity will also pay the facevalue (typically $100)

10 year note is the widely used

benchmark for market's take onlong-term interest rates

Treasury stopped issuing the 30year bonds in October 2001 but itwas reintroduced in February 200

Source: WSJ Online


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From WSJ

Source: WSJ Paper Edition, August 12


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Current news

Pakistan targets 145 billon rupee in t-bill auctions on sep 28, Monday 200911:33am


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References:

www.pnbgits.com/tbills.aspEn.wikipedia/wiki/unitied_states_treasur

y_

securitywww.investopedia.com/teams/t/treasury

bill.asp

www.sbidfhi.com/treasury-bills.htmwww.allinterview.com/showanswers/173

5.html
http://www.pnbgits.com/tbills.asphttp://www.investopedia.com/teams/t/treasurybill.asphttp://www.investopedia.com/teams/t/treasurybill.asphttp://www.sbidfhi.com/treasury-bills.htmhttp://www.allinterview.com/showanswers/1735.htmlhttp://www.allinterview.com/showanswers/1735.htmlhttp://www.allinterview.com/showanswers/1735.htmlhttp://www.allinterview.com/showanswers/1735.htmlhttp://www.sbidfhi.com/treasury-bills.htmhttp://www.sbidfhi.com/treasury-bills.htmhttp://www.sbidfhi.com/treasury-bills.htmhttp://www.investopedia.com/teams/t/treasurybill.asphttp://www.investopedia.com/teams/t/treasurybill.asphttp://www.pnbgits.com/tbills.asp


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39035661 Ppt Treasury Bills