One of the safest investment opportunities in the market today is Treasury bills, commonly known as the T-Bills. Aside from the fact that they are provided and backed by the full faith of the government of the U.S., T-bills are typically sold at a discount basis through auctions.
Unlike the long-term government securities like treasury notes, T-bills’ unique and short-term maturities that range from four weeks up to 12 months make them an ideal option for conservative investors who are not looking for long-term commitments and bigger risks.
However, longer maturity dates for t-bills investment also means a higher interest rate that will be paid to the investor. Treasury bills have a characteristic of being a liquid investment and this high liquidity makes their yield rate usually lower compared to long-term securities.
While T-bill pricing does not easily fluctuate and produce different numbers, this pattern can be disrupted by the sale or purchase in large quantities – usually by the central bank.
Moreover, the prices of treasury bills are determined at the auctions by following an organized bidding process. These bids are categorized into two classifications: competitive and noncompetitive. The former determines a discounted price from the treasury bill’s par value while the latter, allows its investors to submit a bid in order to purchase the bills’ specific dollar amount.
Treasury bills do not only benefit investors but as a government-backed investment option, it provides financial support and funding to different projects and infrastructure that benefit the public.