Treasury bills

(noun)

Treasury bills (or T-Bills) mature in one year or less. Like zero-coupon bonds, they do not pay interest prior to maturity; instead they are sold at a discount of the par value to create a positive yield to maturity.

Examples of Treasury bills in the following topics:

  • The Common Financial Instruments

  • Zero-Coupon Bonds

    • Treasury bills, U.S. savings bonds, and long-term zero-coupon bonds.
    • Short-term zero coupon bonds generally have maturities of less than one year and are called bills.
    • Treasury bill market is the most active and liquid debt market in the world.

  • Problems with WACC

    • Treasury bills, notes, and bonds.

  • The Nature of Bonds

    • Treasury bonds, notes, and bills, which are collectively referred to simply as "Treasuries. " Two features of a bond - credit quality and duration - are the principal determinants of a bond's interest rate.
    • Bond maturities range from a 90-day Treasury bill to a 30-year government bond.

  • Default Risk and Bond Price

    • Furthermore, the U.S. government offers Treasury Bills, Treasury Notes, and Treasury Bonds that range in maturity from 15 days to 30 years.

  • Answers to Chapter 2 Questions

    • Treasury bills (T-bills), commercial paper, banker's acceptances, negotiable bank certificates of deposit (CDs), repurchase agreements, Federal Funds, and Eurodollars.
    • Capital market instruments are Treasury notes (T-notes), Treasury bonds (T-bonds), general-obligation bonds, revenue bonds, and mortgages.

  • Financial Instruments

    • U.S.Treasury bills or T-bills are loans to the U.S. government.Maturities range from 15 days to one year.T-bills do not have an interest rate stamped on them, and they start at $10,000.If an investor buys a T-bill for $19,000, and the T-bill has a face value of $20,000 with a maturity of six months.Then six months later, the government will pay $20,000.The $1,000 reflects the interest.
    • Repurchase Agreements (repos) are short-term loans.For example, a bank sells T-bills to a customer and promises to buy it back the next day for a higher price.Greater price reflects interest.Banks used repos to circumvent the law, so banks could pay businesses interest on their checking accounts.Before the 1980s, U.S. banks could not pay interest on checking accounts.For example, IBM has excess funds in their checking account.Bank sells IBM T-bills and uses IBM's funds.Next day, the bank returns IBM's funds with interest and takes the T-bills back.Consequently, the bank paid interest on a checking account, although the U.S. law prohibited banks to pay interest on checking accounts.
    • U.S.Treasury securities are loans to the U.S. government.The U.S. government issues
    • Treasury Notes or T-notes from one to 10 years, while Treasury Bonds or T-bonds have maturities greater than 10 years.These Treasury securities have a stated interest rate, and government usually pays interest every six months.

  • Does U.S. Treasury Affect the Monetary Base?

    • Treasury Department.
    • Treasury finances a budget deficit by selling T-bills.
    • You buy a $20,000 T-bill.
    • Treasury.
    • For example, the Fed directly buys $100,000 in T-bills from the U.S. government.

  • Is the Federal Reserve Independent of the U.S. Government?

    • Treasury Office, even though some Presidents tried to influence it.
    • Treasury department can finance the deficit by issuing T-bills.
    • Nevertheless, the T-bill supply rises, causing the market price of T-bills to fall.
    • If the Fed maintains a fixed interest rate, it must buy the T-bills the Treasury issued, expanding both bank reserves and money supply.
    • Consequently, a government would suffer from a budget deficit that its treasury can finance by selling government bonds.

  • The Fed's Balance Sheet

    • Securities are the largest holdings of the Fed's assets, and they consist of U.S. government securities: T-bills, T-notes, and T-bonds.
    • Treasury account at the Fed.
    • Treasury.
    • Treasury deposits: The U.S.
    • Treasury deposited $65.7 billion at the Fed.