Investment: Are You Planning to Buy Treasury Bills?
If you are risk averse, investing in Treasury Bills will match your profile. It is very unlikely to lose your investment.
Meanwhile, the income from investing in T-Bills is tax free, so interest received is not subject to withholding tax.
You will receive an immediate Investment confirmation letter for the Treasury bills when you purchase it.
There is another upside, holders can use their T-Bills certificates as collateral for securing loans.
It is easily convertible to cash, so your banks would accept it as collateral for loans amount not beyond the face value.
That is, what the certificate worth.
About Treasury Bills
Treasury Bills (T-bills) are marketable money market securities that serve the purpose of raising money for the government and are also used as monetary policy tools by the Central Bank.
T-bills are short-term securities that mature in 1 year or less from their issue date. They are usually issued with 3-month, 6-month, and 1-year maturities.
How do you participate?
The T-bills Primary Auction bid holds twice in a month – that is every Wednesday.
Analysts stop rates are our estimates and might not necessarily hold true, as the final decision always lies with the CBN based on the auction process.
How is Return Determined?
T-bills are purchased for a price that is less than their par (face) value; when they mature, the government pays the holder the full par value.
Effectively, your interest is the difference between the purchase price of the security and what you get at maturity.
Money Market Upbeat on Strong System Liquidity
How does the Auction Process work?
Treasury bills (as well as notes and bonds) are issued through a competitive bidding process at auctions.
Primary market trading of Treasury bill instruments entails auctions by the country’s monetary authority – The Central Bank of Nigeria.
T-bills are auctioned at established rates which determine the return to investors.
Purchasing these instruments in the primary market and holding it until maturity would mean that the investor gets a fixed interest payment.
Benefits of T-bills
The biggest reasons that T-Bills are so popular are that they are one of the few money market instruments that are affordable to individual investors.
Other positives are that T-bills (and all Treasuries) are considered to be risk-free investments because they are backed by the full faith of the Federal Government.
In addition, returns on T-bills are tax-free, unlike equities.
The only downside to T-bills is that investors will not get a great return (alpha) because Treasuries are considered “exceptionally safe”.
Investing through Meristem Wealth Management Limited
Meristem Wealth Management Limited charges a transaction fee of 0.25% of the principal amount invested, and there will be three (3) days prior notification before maturity for all Treasury Bills investments.
Investment: Are You Planning to Buy Treasury Bills?
