Government Securities: What You Need to Know About Treasury Bills

Government securities are financial instruments issued by governments to raise funds from institutional and individual investors for financing purposes. 

These securities allow Government to borrow money for infrastructural projects, social programmes, and other expenses.

In return, investors benefit from rates of returns that are typically above those offered by a regular savings account.

Government securities include short term securities such as Treasury Bills and medium- and long-term securities such as Treasury Notes and Debentures. 

In this article, we discuss Treasury Bills.

What are Treasury Bills?

Treasury bills are short-term securities issued by Government to raise funds. They mature in 91 or 182 days and the minimum bid is for a nominal value of $1,000.

How do Treasury Bills work?

There are two options for investing in treasury bills. One is through a competitive bidding process in which investors submit bids indicating the amount they wish to purchase and the return they are willing to accept. Government then selects the most competitive bids.

The other option, which is available to individual investors only, is to participate in a non-competitive bid window. This allows individuals to apply for the amount and maturity period of Treasury Bills that they wish to purchase without specifying the return they will earn for every $100 of the amount tendered. 

Individuals who opt to utilise the non-competitive window will receive the amount tendered at a rate that is the average of the successful competitive bidders.

Unlike other types of investments, Treasury Bills don’t pay periodic interest. Instead, the investor gets a return when the Treasury Bill matures and Government pays the full-face value of the bill. The difference between the purchase price and the face/nominal value of the security represents the interest earned by the investor.

Let’s say you offer to purchase a 91-day Treasury Bill with a face value of $10,000 for $9, 925. When the bill matures, Government will pay you $10,000. Your earnings would be $75.

Who Should Invest in Treasury Bills?

Treasury Bills are ideal for people looking for a short-term investment with a fixed, predictable yield. 

How Can I Get Treasury Bills?

Government typically issues Treasury Bills each month.

Application forms are available at the Treasury Department or online at https://treasury.gov.bb/content/forms. When you complete your form, email it to treasury.bills@barbados.gov.bb or forward it to the Treasury Department in a sealed envelope addressed:

Confidential

TREASURY BILL TENDER

The Accountant General

The Treasury Department

1st Flr NHC Building

Country Road, St. Michael

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