treasury bill (T-bill)

  

Definition

Short-term (usually less than one year, typically three months) maturity promissory note issued by a national (federal) government as a primary instrument for regulating money supply and raising funds via open market operations. Issued through the country's central bank, T-bills commonly pay no explicit interest but are sold at a discount, their yield being the difference between the purchase price and the par-value (also called redemption value). This yield is closely watched by financial markets and affects the yield on municipal and corporate bonds and bank interest rates. Although their yield is lower than on other securities with similar maturities, T-bills are very popular with institutional investors because, being backed by the government's full faith and credit, they come closest to a risk free investment. Issued first time in 1877 in the UK and in 1929 in the US.

Use this term in a sentence

  • The treasury bill was finally issued, after months and months of arguing and disagreeing with one another in the company.

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  • You should always keep any treasury bill you have in a safe place so that you are ready to cash it when the time comes.

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  • You can sometimes get a very good interest rate on a treasury bill if you can handle having your cash tied up.

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