Treasury Bill
is a Short-term (usually less than one year, typically three months) maturity promissory
note issued by a national 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. It is issued first time in 1877 in the UK and in
1929 in the US.
