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What is a Treasury Bill - T-Bill? | sodere

What is a Treasury Bill - T-Bill?

A short-term debt obligation backed by the a government (Eg. In this case Ethiopia government) with a maturity of less than one year. In US, T-bills are sold in denominations of $1,000 up to a maximum purchase of $5 million and commonly have maturities of one month (four weeks), three months (13 weeks) or six months (26 weeks).
T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder.
For example, let's say you buy a 13-week T-bill priced at $9,800. Essentially, the U.S. government (and its nearly bulletproof credit rating) writes you an IOU(I owe you) (a note saying that the government owe you money) for $10,000 that it agrees to pay back in three months. You will not receive regular payments as you would with a coupon bond, for example. Instead, the appreciation - and, therefore, the value to you - comes from the difference between the discounted value you originally paid and the amount you receive back ($10,000). In this case, the T-bill pays a 2.04% interest rate ($200/$9,800 = 2.04%) over a three-month period.
Source:Investopedia

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