FT Guide to Bond and Money Markets

CHAPTER 9

TREASURY BILLS AND COMMERCIAL PAPER

Treasury bills

Throughout the world, government agencies issue Treasury bills (T-bills or Treasury notes).¹ They do not pay a coupon; the return investors receive is the difference between the purchase price and the selling/redemption price – they trade at a discount to their face value, and the discount reflects the current rate of interest on similar securities. They are negotiable securities, which means that they can easily be traded in the secondary market and thus easily liquidated to release cash. They can be one of the most risk-free forms of investing (if you are lending to financially stable governments), but pay a lower return for this reason. T-bills form by far the largest part ...