Article

Treasury Bill
June 07 , 2012

Treasury bills or T-bills are securities maturing in a period less than a year, issued by the central government. These were first issued in India in 1917. Treasury bills are extensively used by banks and financial institutions to manage their short term liquidity needs. 

Presently T-bills of 3 maturities are issued viz, 91-days, 182 days and 364 days. Treasury bills are sold at a discount and redeemed at par value. Difference between the two rates represents interest.

The Reserve Bank auctions treasury bills for the government. 91-day T-bills are auctioned every Wednesday whereas 182-day T-bills and 364-day T-bills are auctioned on alternate Wednesdays.

Because treasury bills are issued by sovereign governments who can print money (if required) and are also liquid these have no default risk. So they are considered risk-free securities and interest of other securities is often benchmarked to the returns of treasury bills.

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