Knowing more about Treasury Bills

One of the most attractive features of Treasury Bills is safety: Money placed in treasuries is backed by the “full faith and credit” of the Nigerian government. Unlike corporate bonds or municipal bonds, treasuries are considered to have a zero chance of default; markets assume that the government will always make good on its financial obligations. If fact, in finance, the interest rate paid on treasury securities is referred to as the “risk-free rate,” according to https://www.sapling.com.

Convenience and Tax Savings: Buying Treasury Bills is easy. Besides the convenience of buying the bills, you also get the benefit of saving money. Profits you earn from investing in treasuries are exempt from taxes.

In investing, risk correlates with the return: To get a high return, you have to take risks. To get safety, you have to give up some return. The risk-free rate on short-term Treasury Bills is just about the lowest return promised by any investment. The government still has to pay some interest to entice people to buy bills rather than just keep their money in a bank, where it is more easily accessible, but itis not much. You may be able to beat the returns of fixed deposits and high-yield savings accounts. You can definitely do better by putting your money into corporate bonds, although the trick is in knowing which ones.

Limited access: Another problem with treasuries is the difficulty in getting your money out. If you need to cash in the bill before its maturity date, you may have to pay a penalty. This means that all of your original investment may not be returned to you, depending on when you take the money out. The alternative is to try to sell your bill to someone else, but to do so, your bank will likely charge you a fee. If you think you will need access to the money before maturity, you will likely be better off to put it into a bank account.