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Financial Dictionary - Treasury bills

Treasury bills

Treasury bills are short-term debt issued by the State to raise funding. They consist of a payment obligation on the part of the Issuing State before the Debt Holder, based on which the State commits to returning the invested principal plus interest upon maturity. .

At Bankinter, we can operate with Bills ( issued by the Treasury and which are traded at a discount, in other words, the customer buys the bills and the State undertakes to repurchase them for the nominal amount (the nominal unit is €1,000) upon maturity, meaning that the rate at the time of purchase is discounted from the nominal amount, resulting in the cash to be paid by the customer.

The profitability of treasury bills is therefore the difference between what you pay for them and the nominal value acquired, which is what the Treasury commits to repaying. Bills, given their limited duration (maximum 18 months), never pay a coupon. Their price varies essentially depending on the current interest rate, the duration of the debt and the credit risk of the issuer as perceived by the market at any given time.

Treasury bills can be acquired in two ways:

  • Primary market: This operates through the auction process.
  • Secondary market: These issues have already been issued and therefore it is possible to establish the term and interest rate; in this case, you buy on the market at the list price of the debt at a given time, provided there is enough liquidity. Once purchased, you can hold it until its maturity, receiving the nominal value, or selling it before its maturity on the market.

Treasury bills are considered low-risk assets as they are very short-term issues by the State.


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