finance - treasury bill
TRANSCRIPT
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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