Finance - Treasury Bill

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    Definition of 'Treasury Bill - T-Bill'

    A short-term debt obligation backed by the U.S. government with a maturity of less than

    one year. T-bills are sold in denominations of $1, u! to a ma"imum !urchase of $#

    million and commonly have maturities of one month four weeks%, three months

    T-bills are issued through a com!etitive bidding !rocess at a discount from !ar, which

    means that rather than !aying fi"ed interest !ayments like conventional bonds, the

    a!!reciation of the bond !rovides the return to the holder.

    Investopedia explains 'Treasury Bill - T-Bill'

    &or e"am!le, let's say you buy a 1(-week T-bill !riced at $),*. +ssentially, the U.S.

    government and its nearly bullet!roof credit rating% writes you an U for $1, that

    it agrees to !ay back in three months. ou will not receive regular !ayments as you

    would with a cou!on bond, for e"am!le. nstead, the a!!reciation - and, therefore, the

    value to you - comes from the difference between the discounted value you originally

    !aid and the amount you receive back $1,%. n this case, the T-bill !ays a /.0

    interest rate $/2$),* 3 /.0% over a three-month !eriod.

    LTHE ORIGINS O TRE!S"R# BILLS

    Treasury bills were first used in the United States during 4orld 4ar , as a source of

    emergency funds to hel! balance the un!recedentedly high !ublic debt. 5y the end of 4orld

    4ar , T-bills had become the most !o!ular form of short-term government security.

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    LTRE!S"R# BILLS NO$ %ORE !ORD!BLE

    Treasury bills have not always been as accessible as they are now. Starting in 1))*, the

    minimum amount you could !urchase a treasury bill for was $1,. As of A!ril 6, /*,

    however, it is !ossible to buy bills for a minimum of only $1 and in all increments of $1.

    This makes treasury bills more versatile and available to more !eo!le than ever before.

    L&O%ETITI(E BIDDING RET"RNS SI%LIIED

    Until 1))*, not all bidders received the same discount rate. 7ates used to vary according to a

    range of acce!ted bids above the so-called cut-off yield. The bidders closest to this cut-off

    received the highest returns, while !eo!le who bid higher that is, demanded a lower discount

    rate% got what they asked for and received fewer returns. 8ow there is still a range of acce!ted

    bids, but all bidders receive the highest acce!ted yield.

    l$)at is treasury *ill +T-*ill,

    Short-termusually less than one year, ty!ically three months% maturity !romissory note

    issued by a national federal% government as a !rimary instrument for regulating money

    su!!ly and raising funds via o!en market o!erations. ssued through the country's

    central bank, T-bills commonly !ay no e"!licit interest but are sold at a discount, their

    yieldbeing the difference between the !urchase !rice and the !ar-value also called

    redem!tion value%. This yield is closely watched by financial markets and affects the

    yield on munici!al and cor!orate bonds and bank interest rates. Although their yield is

    lower than on other securities with similar maturities, T-bills are very !o!ular with

    institutional investors because, being backed by the government's full faith and credit,

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    they come closest to a risk free investment. ssued first time in 1*66 in the U9 and in

    1)/) in the US.

    T-bills are short-term loans to the U.S. government. They come in terms of 1-month, (-

    months, :-months, and 1-year. They carry a !ar value of $1, and u! to $# million

    worth can be bought at a time. These are known as a ;ero cou!on bond. They do not

    !ay interest !ayments, but instead are sold at a discount to !ar value such that when

    the !urchase amount is com!ounded at the yield, it increases to the !ar value by the

    maturity date. &or instance, if the yield is /.0 on a :-month T-bill, it would sell at

    $)*).). n si" months, when it matures, the investor would receive $1,, which

    re!resents a /.0 annual yield. $1.1 2 $)*).) 3 1./ " / 3 /.0 multi!ly by /

    because this is a :-month bill, but yields are e"!ressed on an annual basis%. T-bills are

    backed by the credit of the U.S. government, and thus are considered as close to a

    risk-free investment. The yield for the a!!ro!riate Treasury bill or note or bond% is used

    in the ca!ital asset !ricing model as !art of the determination of the cost of ca!ital.

    A Treasury 5ill known as T-5ill% is an instrument of money market, used to finance

    short term reebtobligations of the US Treasury that have maturities of one year or less. ?aturities

    for T-bills are usually )1 days, 1*/ days, or #/ weeks. Treasury bills are sold at a

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    discount from face value and do not !ay interest before maturity. The interest is the

    difference between the !urchase !rice of the bill and the amount that is !aid to you

    either at maturity this amount is the face value% or when you sell the bill !rior to

    maturity.

    Treasury bills are instrument of short-term borrowing by the =overnment of ndia,

    issued as !romissory notes under discount. The interest received on them is the

    discount which is the difference between the !rice at which they are issued and their

    redem!tion value. They have assured yield and negligible risk of default. Under one

    classification, treasury bills are categorised as ad hoc, ta! and auction bills and under

    another classification it is classified on the maturity !eriod like )1-days T5s, 1*/-days

    T5s, (:0-days T5s and two ty!es of 10-days T5s. n the recent times //@(, /(@

    0%, the 7eserve 5ank of ndia has been issuing only )1-day and (:0-day treasury

    bills. the auction format of )1-day treasury bill has changed from uniform !rice to

    multi!le !rice to encourage more res!onsible bidding from the market !layers.0B

    the

    bills are two kinds- Adhoc and regular. the adhoc bills are issued for investment by the

    state governments, semi government de!artments and foreign central banks for

    tem!orary investment. they are not sold to banks and general !ublic. The treasury bills

    sold to the !ublic and banks are called regular treasury bills. they are freely

    marketable. commercial bank buy entire

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    The ta" e

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    receive money back. The government then !ays you the full !rice of the bill -- in this

    case $1, -- and you earn $0 from your investment. The amount that you earn is

    considered interest, or your !ayment for the loan of your money. The difference

    between the value of the bill and the amount you !ay for it is called the dis/ount rate1

    and is set as a !ercentage. n the e"am!le above, the discount rate is 0 !ercent,

    because $0 is 0 !ercent of $1,.

    Treasury bills are one of the safest forms of investment in the world because they are

    backed by the U.S. government. They are considered risk-free. They are also used by

    many other governments throughout the world.

    7ead on to find out about the different kinds of treasury bills, how to buy a treasury bill,

    and why they are so !o!ular.

    Ho2 Treasury Bills %a3e %oney

    All treasury bills are short-term investments and mature within a year from their date of

    issue. ou have the o!tion of buying bills with maturity !eriods of one month, si"

    months or one year. =enerally, the longer the maturity !eriod, the more money you will

    make from your investment. The face value of a treasury bill is called its par value, and

    the most commonly sold bills have a !ar between $1, and $1,. The minimum

    amount you can buy a bill for, though, is $1. T-bills are sold in increments of $1 u!

    to $1 million sourceH Treasury>irectB.

    The !ur!ose of treasury bills is to hel! finance the national debt. They are a way for the

    government to make money from the !ublic. Deo!le and cor!orations can buy treasury

    bills.

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    There are many reasons why treasury bills are !o!ular. 8ot only are they affordable

    enough that almost anyone can buy one, but they offer fast returns, and they are

    sim!le, easy to understand and very reliable. Additionally, the money you gain from

    investing in treasury bills is e"em!t from state and local ta"es. ou do have to !ay

    federal income ta" on it, however. Treasury bills are also a highly li4uidform of

    investment. This means that they are easily tradable. They can be sold on the

    se/ondary 0ar3etand easily converted into cash. f you sell a bill on the secondary

    market, you sell it to someone else instead of waiting for it to mature.

    ne of the only downsides to treasury bills is that the returns are smaller than those from many

    other forms of investment. This is because they are so low-risk.

    Ho2 to Buy a Treasury Bill

    ou can !urchase treasury bills at a bank, through a dealer or broker, or online from a

    website likeTreasury>irect. The bills are issued through an auction bidding !rocess,

    which occurs weekly. Treasury bills are now issued only in electronic form, though they

    used to be !a!er bills.

    5efore you buy a bill, you have to decide whether to make a /o0petitive or non-

    /o0petitive bid. 8on-com!etitive bidding is the sim!lest way to !urchase a treasury

    bill and is what most !eo!le do who are not e"!erts in security trading. 4hen you make

    a non-com!etitive bid, you agree to acce!t whatever interest rate is decided at the

    auction. ou are guaranteed that your bid will be acce!ted and that you will get the full

    amount of your bill !aid back to you. 5ut you won't know e"actly what interest rate you

    will receive until the auction closes.

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    n com!etitive bidding, on the other hand, you s!ecify the return you want to receive.

    This kind of bidding is usually done by cor!orations and !eo!le who really understand

    the su!!ly and demand of the securities market. t is more com!licated because you

    don't know whether your bid will be acce!ted. f the rate of interest you s!ecify is less

    than or e

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    Treasury Bills In Dept)

    Treasury bills, or T-bills, are ty!ically issued at a discount from the !ar amount also

    called face value%. &or e"am!le, if you buy a $1, bill at a !rice !er $1 of

    $)).)*:111, then you would !ay $))).*: $1, " .)))*:111 3 $))).*:111%.J 4hen

    the bill matures, you would be !aid its face value, $1,. our interest is the face

    value minus the !urchase !rice. t is !ossible for a bill auction to result in a !rice eirect or through a bank or broker. The table below

    shows the ty!es of bills available for !urchase by both means. 4e no longer sell bills

    in Kegacy Treasury >irect, which we are !hasing out.%

    Ter0TreasuryDire/tBan36or Bro3er0-4eek 5illeses1(-4eek

    5illeses/:-4eek 5illeses#/-4eek 5illesesLash

    ?anagement 5ills8oes

    ou can bid for a bill in two waysH

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    4ith a non /o0petitive *id, you agree to acce!t the discount rate determined at

    auction. 4ith this bid, you are guaranteed to receive the bill you want, and in the

    full amount you want.

    4ith a /o0petitive *id, you s!ecify the discount rate you are willing to acce!t.

    our bid may beH 1% acce!ted in the full amount you want if the rate you s!ecify is

    less than the discount rate set by the auction, /% acce!ted in less than the full

    amount you want if your bid is eirect, or a bank or broker.

    To !lace a com!etitive bid, you must use a bank or broker.

    l

    l9ey &acts of Treasury billsH

    l5ills are sold at a discount. The discount rate is determined at auction.

    l5ills !ay interest only at maturity. The interest is e

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    ln a single auction, an investor can buy u! to $# million in bills by non-com!etitive

    bidding or u! to (# of the initial offering amount by com!etitive bidding.

    JTreasury rounds to the nearest !enny using conventional mathematical rounding

    methods.

    TRE!S"R# BILLS !ND D!TED SE&"RITIES

    Treasury 5ills are the instruments of short term borrowing by the Lentral2State

    govt. They are !romissory notes issued at discount and for a fi"ed !eriod. These

    were first issued in ndia in 1)16.

    O*7e/tives

    These are issued to raise funds for meeting e"!enditure needs and also !rovide

    outlet for !arking tem!orary sur!lus funds by investors.

    Investors

    Treasury bills can be !urchased by any one including individuals% e"ce!t State

    govt. These are issued by 75 and sold through fortnightly or monthly auctions

    at varying discount rate de!ending u!on the bids.

    Deno0ination

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    ?inimum amount of face value 7s.1 lac and in multi!les there of. There is no

    s!ecific amount2limit on the e"tent to which these can be issued or !urchased.

    %aturity

    )1 days and (:0 days.

    Rate of interest8

    ?arket determined, based on demand for and su!!ly of funds in the money

    market.

    Ot)er features

    M These are highly li&G is the market maker in these

    instruments and !rovide daily% two way

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    Treasury Bills

    Types

    Treasury bills T-bills% offer short-term investment o!!ortunities,generally u! to one year. They are thus useful in managing short-term li

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    !0ount

    Treasury bills are available for a minimum amount of 7s./#,and in multi!les of 7s. /#,. Treasury bills are issued at a

    discount and are redeemed at !ar. Treasury bills are also issuedunder the ?arket Stabili;ation Scheme ?SS%.

    !u/tions

    4hile )1-day T-bills are auctioned every week on 4ednesdays,1*/-day and (:0-day T-bills are auctioned every alternate weekon 4ednesdays. The 7eserve 5ank of ndia issues a

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    &ollowing &riday

    J f the day of !ayment falls on a holiday, the !ayment is made onthe day after the holiday.ay0ent

    Dayment by allottees at the auction is reS member.

    Dated Se/urities

    =overnment !a!er with tenor beyond one year is known as datedsecurity. At !resent, there are Lentral =overnment datedsecurities with a tenor u! to ( years in the market.

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    !u/tion6Sale

    >ated securities are sold through auctions. &i"ed cou!onsecurities are sometimes also sold on ta! that is ke!t o!en for a

    few days. f late, the issuance of Lentral2state =overnmentdated securities are being done through auctions.

    !nnoun/e0ent

    A half yearly calendar is issued in case of Lentral =overnmentdated securities, indicating the amounts, the !eriod within whichthe auction will be held and the tenor of the security, which ismade available on 7eserve 5ankNs website. The =overnment ofndia and the 7eserve 5ank also issue a !ress release toannounce the sale, a few days normally a week% before theauction. The !ress release is widely re!orted in the !rint mediaand wire agencies. The government of ndia also issues anadvertisement in the leading financial news!a!ers. Theannouncement of auctions2sales and their results are !ublishedon the 7eserve 5ank website U7KHhtt!H22www.rbi.org.in%

    !0ount

    Subscri!tions can be for a minimum amount of 7s.1, and inmulti!les of 7s.1,.

    $)ere are t)e sales )eld

    Auctions are conducted electronically on D>-8>S system. Thebids are submitted by the members on D>-8>S system both ontheir own behalf as well as on behalf of their clients Drovidentfunds can submit their bids com!etitive2non-com!etitive to their

    res!ective custodian or to any bank2D> who is an 8>S member.

    ay0ent

    The !ayment by successful bidders is made on the issue date, ass!ecified in the auction notification, usually the working dayfollowing the auction day.

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    State Govern0ent Se/urities

    These are securities issued by the state governments and arealso known as State >evelo!ment Koans S>Ks%. The issues are

    also managed and serviced by the 7eserve 5ank of ndia.The tenor of state government securities is normally ten years.State government securities are available for a minimum amountof 7s.1, and in multi!les of 7s.1,. These are availableat a fi"ed cou!on rate. The auctions for State =overnmentsecurities are held electronically on D>-8>S module.

    !vaila*ility of G-se/s

    A!art from !urchasing government securities in the !rimaryissuance, i.e. through auctions2sales, all ty!es of government!a!er can also be !urchased from the secondary market. Drimary>ealersalso !urchase and sell securities. Drovident &unds canbid under 8on-com!etitive bidding facility in !rimary auction of =-Secs under which they can !lace a single bid of u! to 7s. twocrore face value% minimum 7s. 1,2-% through their custodianbank2D>%. The allotment is made at the weighted average cut-offyield2!rice of the com!etitive bids acce!ted in the auction.

    Ne5ative Rates on Treasury

    Bills S)o2 Little De*t-Li0it

    &on/ern

    A slide below ;ero in rates on some Treasury bills that mature beyond

    ctober shows investors have little angst lawmakers may fail to

    agree on a debt limit.

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    A falling su!!ly of Treasury bills has been met with !ersistent demand

    for the securities, viewed among the worldNs safest, in !art as

    heightened regulatory re

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    determines the yield. The yield on )1-day Treasury bills is the average

    discount rate.

    Ho2 it's used8 The rate is used as an inde" for various variable rate loans,

    !articularly Stafford and DKUS education loans. Kenders use such an inde",

    which varies, to adIust interest rates as economic conditions change. They

    then add a certain number of !ercentage !oints called a margin, which doesn't

    vary, to the inde" to establish the interest rate you must !ay. 4hen this inde"

    goes u!, interest rates on any loans tied to it also go u!.

    ;< $)at's a Treasury *illTreasury bills are short-term debt instruments issued by the U.S. >e!artment of

    the Treasury on a weekly basis to finance the o!eration of the federalgovernment. They are !art of the series of marketable securities issued by thegovernment including FbillsF R1 yr%, FnotesF 1yr-1 yr%, and FbondsF 1yr%.They are also !art of what com!rises the Fmoney marketF for short-term debtinstruments.

    =< Ho2 do Treasury *ills 2or3They are a form of ;ero-cou!on bond. This means, you buy the T-bill at a!urchase !rice that's a discount from face value, hold it for a s!ecified !eriod oftime, and then receive the face value !urchase !rice interest% back. They aresold in multi!les of $1. &or instance, you might be buying bills for $)6# and

    receive $1 after : months, where the $/# difference is the FinterestF youreceive. t is the bill's discounted !rice that's determined at auction, and which willdetermine the rate you get. The Treasury will not redeem the bill before maturity,but you can sell it to the secondary market, which consists of buyers interested inbuying already issued Treasury securities, usually for a different !rice than whatyou originally !aid at the auction.

    >< $)at ter0s are availa*leThe Treasury currently auctions /* day, )1 day, and 1*/ day bills often referredto 1 month, ( month, : month bills%. There are shorter term Fcash managementbillsF which are not available to individual investors.

    ?< $)at are t)e i0portant dates- Tentative auction calendarH !ublished

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    and 1*/ day, and Tuesday for /* day bills% one has to re

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    have, in order to beat the return of the T-bill. The ta" e account.

    ;>< !re t)ere any fees involvedThere are no fees in T> for T-bills held to maturity, and no account maintenancefees. Similarly, no rates for T-bills held in Kegacy T> although an annual fee doesa!!ly for $1k account balance. 4hen buying from a broker, make sure they

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    charge no fees for T-bills bought at auction and !ass the full auction rate along toyou. Although no recommedation is given, &idelity has been verified by multi!le!osters as charging no fees and giving the full rate.

    ;?< &an I 9really9 sell t)e *ill ri5)t a2ay after I *uy it

    es but no. t de!ends. T-bills are fundamentally some of the most li for buyingthe bills, a 0#-day hold or /*-day hold% a!!lies during which you cannot sell thebill. This is for the Treasury to make sure you're good for the money.% The holddoes not a!!ly to Kegacy T>. Any hold that your broker im!oses would be !ertheir own !olicy.

    ;@< I opened an a//ount 2it) TD1 *ut I'0 not a*le to transfer 0oney or *uyT-*ills.

    ;< $)at are /as) 0ana5e0ent *ills and )o2 /an I *uy t)e0The shortest term of T-bills usually between 1-/ week terms% are called Fcashmanagement bills.F They are auctioned infree!ending on currentrate e"!ectations for the future i.e. if rate increases or rate cuts are e"!ected%,these can sometimes !roduce the highest yields of currently auctioned T-bills of

    course only for a short duration%. They are not sold through T> or Kegacy T>, butonly through the commercial book entry system. ndividuals can !artici!atethrough brokers, although Litibank Drivate 5ank is the only confirmed broker whooffers cash management bills to its clients. The overall gain from seeking toinvest in these rather than other T-bills is

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    &o0parison to savin5s a//ounts8

    - T-bills can be !urchased and sold at any time

    - &airly low minimum $1%, although there are many no-minimum savings

    accounts

    - Unlike savings accounts with fluctuating interest, the interest is guaranteed for

    the term of the bill however, there is no o!!ortunity for the rate to rise when held

    to maturity. Should T-bill yields rise further, and you sell, you'll get a lower !rice

    for the bill than if rates had stayed the same or fell%. f market yields do fall, you

    can command a higher !rice if you sell.

    - Lurrently, AD is com!arable to high yield savings accounts with similarly low

    minimum. Ta" e

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    have e"!ressed that they believe them to be eL28LUA

    !rovide insurance u! to a s!ecific limit also backed by the full faith and credit of

    the US government. ther members e"!ressed !roblems with government

    insured accounts during the SWK crisis.

    - Treasury securities guarantee !rinci!al and interest. The !ossibility e"ists that

    an &>L28LUA account will receive !rinci!al but not interest on failed

    banks2credit unions. Also, there may be delays in recovering the !rinci!al, but

    &>L is re

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    )1.60/.(:/.)(.#:(.*)2#21(.(./.:.1:.#/.)61.*#/.0#/.)*(.:0(.**)2:21(./

    ./.#.10.0:.)11.66/.(*/.)0(.:/(.*6)2)21(././.0.1/.0#.*61.61/.(0/.)(.

    :(.*0)2121(.1./.0.1(.#.)/1.6*/.0/.):(.:#(.**)21121(.1./.#.1/.0

    6.**1.6//.(0/.)((.:1(.*#)21/21(.1.1./.1(.0#.*61.6//.(0/.)/(.:(.*#)21(21(

    .1.1./.1(.0#.*61.61/.(//.)(.#)(.*0)21:21(.1./.0.1(.01.*1.:#/./6/.**(.:1(.*6)21621(.1.1.0.1/.().6*1.://./:/.*:(.#6(.*0)21*21(.1.1.0.1

    1.(0.:61.0(/.#/.:)(.0:(.6#)21)21(..1.(.1.(0.:)1.0)/.1(/.6:(.#/(.*)2/

    21(.1.1.#.11.(0.:)1.#/.1(/.6#(.#(.66)2/(21(.1./.#.1.(#.:*1.0*/.

    1/.6/(.0:(.6()2/021(././.#.1.(#.:61.00/.#/.:6(.0(.:6)2/#21(././.

    #.1.(:.::1.01/.1/.:((.(6(.:#J (-year Treasury constant maturity series was

    discontinued on &ebruary 1*, // and reintroduced on &ebruary ), /:. &rom &ebruary 1*,

    // to &ebruary *, /:, Treasury !ublished alternatives to a (-year rate. See Kong-Term

    Average 7ate for more information.

    Treasury discontinued the /-year constant maturity series at the end of calendar year 1)*:

    and reinstated that series on ctober 1, 1))(. As a result, there are no /-year rates available

    for the time !eriod Oanuary 1, 1)*6 through Se!tember (, 1))(.

    Treasury ield Lurve 7ates. These rates are commonly referred to as FLonstant ?aturity

    TreasuryF rates, or L?Ts. ields are inter!olated by the Treasury from the daily yield curve.

    This curve, which relates the yield on a security to its time to maturity is based on the closing

    market bid yields on actively traded Treasury securities in the over-the-counter market. These

    market yields are calculated from com!osites of

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    As such, Treasury will restrict the use of negative in!ut yields for securities used in deriving

    interest rates for the Treasury nominal Lonstant ?aturity Treasury series L?Ts%. Any L?T

    in!ut !oints with negative yields will be reset to ;ero !ercent !rior to use as in!uts in the L?T

    derivation. This decision is consistent with Treasury not acce!ting negative yields in Treasury

    nominal security auctions.

    n addition, given that L?Ts are used in many statutorily and regulatory determined loan and

    credit !rograms as well as for setting interest rates on non-marketable government securities,

    establishing a floor of ;ero more accurately reflects borrowing costs related to various

    !rograms.

    a3istan *uys ?

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    They are issued with three-month, si"-month and one-year maturities. T-bills are

    !urchased for a !rice that is less than their !arface% value when they mature, the

    government !ays the holder the full !ar value. +ffectively, your interest is the difference

    between the !urchase !rice of the security and what you get at maturity. &or e"am!le, if

    you bought a )-day T-bill at $),* and held it until maturity, you would earn $/ on

    your investment. This differs from cou!on bonds, which !ay interest semi-annually.

    Treasury bills as well as notesand bonds% are issued through a com!etitive bidding

    !rocess at auctions. f you want to buy a T-bill, you submit a bid that is !re!ared

    either non-com!etitivelyorcom!etitively. n non-com!etitive bidding, you'll receive the

    full amount of the security you want at the return determined at the auction. 4ith

    com!etitive bidding, you have to s!ecify the return that you would like to receive. f the

    return you s!ecify is too high, you might not receive any securities, or Iust a !ortion of

    what you bid for. ?ore information on auctions is available at

    the Treasury>irectwebsite.%

    The biggest reasons that T-5ills are so !o!ular is that they are one of the few money

    market instruments that are affordable to the individual investors. T-bills are usually

    issued in denominations of $1,, $#,, $1,, $/#,, $#,, $1, and

    $1 million. ther !ositives are that T-bills and all Treasuries% are considered to be the

    safest investments in the world because the U.S. government backs them. n fact, they

    are considered risk-free. &urthermore, they are e"em!t from state and local ta"es. &or

    more on this, see 4hy do commercial bills have higher yields than T-billsE%

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    The only downside to T-bills is that you won't get a great return because Treasuries are

    e"ce!tionally safe. Lor!orate bonds, certificates of de!ositand money market funds

    will often give higher rates of interest. 4hat's more, you might not get back all of your

    investment if you cash out before thematurity date.

    Reinvest or Redeem Treasury Bills

    What you can do with your Treasury bill when it matures depends on where you

    hold the security.

    If you hold a bill in TreasuryDirect, when the bill matures, you can redeem orreinvest it.

    If you hold a bill in Legacy Treasury Direct,* we redeem the bill when it

    matures.

    If you hold a bill with a bank or broker, consult the bank or broker to learn

    your options.

    TreasuryDirect

    Reinvest

    If you hold a bill in TreasuryDirect, you can use the proceeds from the maturing bill

    to buy another bill of the same term. This is a reinvestment. or instance, if you

    own a !"#week bill, you can use its proceeds to reinvest into another !"#week bill.

    $ou can schedule a reinvestment either when you buy your original security or up to

    four business days before the original security matures. %nce you schedule a

    reinvestment, you can edit or cancel it within the same time frame. or any of

    these functions, log in to TreasuryDirect, go to the &'anageDirect& page, find

    &'anage 'y (ecurities,& and proceed. (eeLearn more about )einvesting 'aturing

    roceeds.

    Redeem

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    To redeem your bill you don+t need to take action. If you do not provide instructions

    to deposit the security+s principal into your of I, we deposit the principal into your

    designated bank account. The deposit is made on the day your security matures.

    lLegacy Treasury Direct*

    lReinvest

    We are phasing out Legacy Treasury Direct and no longer allow reinvestments in

    that system.

    Redeem

    To redeem your bill, you don+t need to take action. %n the day the security

    matures, we deposit its proceeds into your bank account.

    *Legacy Treasury Direct is being phased out.

    Transferring Treasury Bills, Notes, Bonds,

    and TIPS

    NOTE: Transfers aren+t permitted into Legacy Treasury Direct, which is

    being phased out. -owever, customers can transfer securities from one Legacy

    account to another Legacy account see si/th link below0.

    Transfer of securities from Legacy Treasury Direct to TreasuryDirect

    Transfer of securities from the commercial book#entry system to TreasuryDirect

    Transfer of securities from TreasuryDirect to the commercial book#entry system

    Transfer of securities from Legacy Treasury Direct to the commercial book#entry

    system

    Transfer of securities within TreasuryDirect

    Transfer of securities within Legacy Treasury Direct

    lTransfer of (ecurities from Legacy Treasury Direct to TreasuryDirect

    1%pen an accountin TreasuryDirect. If you already have an account, you

    can skip this step.0

    2ill out the Legacy Treasury Direct form &(ecurity Transfer )e1uest& D

    !2340.

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    5In section 5 of the form, check the bo/ for 6Transfer to an 7stablished %nline

    TreasuryDirect 8ccount 9umber.:

    ;-ave your signature on this form certified.

    !'ail the form to the

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    $ou can transfer Treasury bills, notes, bonds, or TI( from Legacy Treasury Direct

    to the commercial book#entry system. In the commercial system, you own the

    securities through a broker or bank. To make the transfer>

    1

    ill out the form &(ecurity Transfer )e1uest& form D !2340.

    "-ave your signature on this form certified.

    5'ail the form to Treasury )etail (ecurities (ite, .%.

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    Treasury Bills: Ta. #onsiderations

    What Is Ta/able IncomeF

    The difference between what you pay for a Treasury billand the amount we payyou at maturity is interest. This interest is e/empt from state and local income

    ta/es.

    lGeeping Track of $our Ta/able Income

    TreasuryDirect

    or a bill held in TreasuryDirect, you can view your orm 2@44#I9T online and print

    it. The form is posted at the beginning of the year, in the year after the bill matures.

    8lso, a record of all ta/able transactions is available at any time. To see it, click the

    6'anage Direct: tab, then under 6'anage 'y Ta/es: choose the appropriate year.

    !egacy Treasury Direct*

    If you hold a bill in Legacy Treasury Direct, we mail you your orm 2@44#I9T. The

    form is mailed to you at the beginning of the year, in the year after the bill matures.

    If you need duplicate 2@44#I9T forms for the current ta/ year, you can order them

    from us. %rder online in 7lectronic (ervices for Treasury

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    lTa/ Withholding

    If you hold a bill with us, we can ease your ta/ burden by withholding up to !@

    percent of your interest earnings.

    TreasuryDirect allows you to specify online the percentage you want us to

    withhold.

    With Legacy Treasury Direct, you call or write to your Treasury )etail

    (ecurities site, give your account number, and state the percentage of your

    earnings that you want to withhold. If calling, dial B@@#3""#"A3B and choose

    option ! for a customer service representative. )epresentatives are available

    from B a.m. to B p.m. 7astern Time, 'onday through riday, e/cept holidays.

    If you write, send your letter to Treasury )etail (ecurities (ite, .%. $ou may be able to deduct the annual

    maintenance fee we impose on Legacy Treasury Direct accounts of more than

    C2@@,@@@. (ee I)( ublication !!@.

    l($at are t$e maturity terms for Treasury /ills0

    8mong bills auctioned on a regular schedule, there are four terms> ; weeks, 25

    weeks, "A weeks, and !" weeks. 8nother bill, the cash management bill, isn+t

    auctioned on a regular schedule. It is issued in variable terms, usually of only a

    matter of days.

    l($at "ind of interest 1ayments 2ill I receive if I o2n a Treasury /ill0

    The only interest payment to you occurs when your bill matures. 8t that time, you

    are paid the par amount also called face value0 of the bill.

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    l($at if an auction results in a 1rice t$at3s not e.actly to t$e 1enny0

    Treasury calculates auction results to the si/th decimal place. In determining the

    particular dollar amount an investor will pay, Treasury rounds to the nearest penny

    using conventional mathematical rounding methods.

    l#an I /uy any Treasury /ill directly from t$e Treasury0

    The ;#week, 25#week, "A#week, and !"#week bills are available in TreasuryDirect.

    ash management bills aren+t available in the system.

    l4o2 do I "no2 2$en /ills 2ill /e auctioned0

    We auction ;#week, 25#week, and "A#week bills every week. Typically, we auction

    25#week and "A#week bills on 'onday and ;#week bills on Tuesday. We auction the

    !"#week bill every four weeks. ash management bills aren+t auctioned according

    to a schedule.

    or specific dates, see our Tentative 8uction (chedule, which shows auction dates

    months in advance, or &?pcoming 8uctions,& which shows auctions that we have

    officially scheduled. 8uctions are officially scheduled only days before they are

    conducted.0

    8lso, you can sign up for e#mail notificationof auctions.

    lDo you still issue /ills in 1a1er form0

    9o. 8ll Treasury bills are now issued and held electronically. aper bills were issuedin the past, but all of them have matured.

    l4o2 can I 1lace a com1etitive /id for a /ill0

    To place a competitive bid, you must use a bank, broker, or dealer.

    l4o2 do I transfer a Treasury /ill from !egacy Treasury Direct to

    TreasuryDirect0

    To transfer a Treasury bill from Legacy Treasury Direct to TreasuryDirect, take these

    steps>

    1%pen an accountin TreasuryDirect. If you already have an account, you

    may skip this step.0

    2omplete the Legacy Treasury Direct form &(ecurity Transfer )e1uest& D

    !2340. In the form+s section 5, check the bo/ for &Transfer to an 7stablished

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    %nline TreasuryDirect 8ccount 9umber.& $our signature on this form must be

    certified. $our bank may provide this service.

    5'ail the form to the

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    reinvest this security, the number of reinvestments. ollow the prompts to complete

    your transaction.

    Within TreasuryDirect, you also can set up reinvestments into securities of the same

    type and term. or instance, you can use the proceeds from a maturing !"#week

    bill to buy another !"#week bill.

    8lso, from the &'y 8ccounts& page, you can 1uickly purchase a security using

    urchase 7/press. With this functionality, you select the type of security and the

    purchase amount. The system uses your preferred registration and the primary

    bank you identified in your account, and then schedules your purchase for the ne/t

    available auction date.

    layments and )eceipts in TreasuryDirect

    When you buy a bill in TreasuryDirect, we withdraw the purchase price from thesource of funds you specify, which could be one of your bank accounts or your

    ertificate of Indebtedness of I0. When the bill matures, we deposit the proceeds

    into your bank account or your of I, whichever you specify.

    l