\

Treasury Bills(T-bills)
Dept obligations of the Government used to finance fiscal deficits. Bangladesh Bank
treasure bills are issued in one three, six, twelve month and two year maturity. They pay a
set amount at maturity. Tax revenues or any other source of government funds may be used
to repay the holders of these financial instruments. They carry great weight in the financial
system due to their zero(or nearly zero)default risk,ready marketability,and high liquidity.

Types of Treasury Bills:

Regular-series bills are issued routinely every week or month in competitive auctions with
original maturities of three months (13 weeks), six months (26 weeks), and one year (52
weeks).
Irregular-series bills are issued only when the Treasury has a special cash need. These
instruments include strip bills and cash management bills.

Primary Issue/Auction of 30-day BB Bill, 91-day, 182-day & 364-day T-Bills scenario in
Bangladesh.
Bids received Bids
Ten accepted
Weigh
Issue or N Fac
Ran N
Fac Sal
Ran
te d
Cu
ISIN
date and o e
g e o
e e
g e
avera
t
Number
* na of valu of of
valu valu
of
ge
of
m e bi e
yiel bi
e e
yiel
Price
yiel
ds ds ds ds d
(Cr.T (Cr.T (Cr.T (taka)
09/02/2 BD010302 30- 1 200.000 6.95 1 200.00 198.86 6.95 99.432 6.95
0 61 44 da 0 0 0 4 0 0
14 y 0 0 0 0
BB
Bill
10/02/2 BD090913 91 39 2326.5 7.25- 1 900.00 883.81 7.25- 98.201 7.40
0 21 46 day 80 7.70 1 0 4 7.40 6 0
14 s 0 0 7 0
T.Bil
Devolvement on
PDs
Mandatory Allocation to
Non- PDs
Devolvement on
Bangladesh
Bank
03/02/2 BD091823 18 51 1963.2 8.18- 8 600.00 576.32 8.18- 96.053 8.27
0 11 45 2 40 9.25 0 3 8.27 9 0
14 days 0 0 4 0
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T.Bill

Devolvement on
PDs
Mandatory Allocation to
Non- PDs
Devolvement on
Bangladesh
Bank
10/02/2 BD093643 36 63 2315.4 8.77- 14 850.00 781.32 8.77- 91.920 8.85
0 21 54 4 60 9.50 0 4 8.85 6 0
14 day 0 0 7 0
s T-
Devolvement on
PDs
Mandatory Allocation to
Non- PDs
Devolvement on
Bangladesh
Bank

How Bills Are Sold

T-bills do not carry a promised interest rate. Instead, they are sold at a discount from their
par or face value.

Bill yields are determined by the bank discount method, which does not compound
interest rates and uses a 360-day year for simplicity.
\

The bank discount rate (DR) on T-bills

ParPP
360
T-bill Discount = Par
n

Because the rates of return on most other debt instruments are not figured in the same
way, comparisons with other securities cannot be made directly.

The investment yield or rate (IR) on T-bills

SPPP
365
PP
YT = n
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Commercial Paper

Commercial paper consists of short term, unsecured promissory notes issued by a corporation
to raise short term cash, often to finance working capital requirements. Unsecured promissory
notes with a fixed maturity of one to 270 days; usually sold at a discount from face value.

Commercial paper is traded mainly in the primary market. Opportunities for resale in the
secondary market are more limited.

Commercial paper is rated prime, desirable, or satisfactory, depending on the credit standing
of the issuing company.

In most cases, Commercial Paper is held until maturity by investors. Financial institutions
such as finance companies and bank holding companies are major issuer
Investors of commercial
in Commercial
Paper. Papers

Money market fund

Bank
Insurance
Companies Pension
Direct or Finance Paper
fund Industrial
Companies Other
Issuers of Commercial
Paper
Finance Companies
Bank Holding Companies
Nonfinancial Firm
Pape
r
Dealer or Deal
industrial paper er
Maturities & Rate of Return

Maturities of commercial paper range from three days (weekend paper) to nine months. Most
commercial paper is issued at a discount from par, and yields to the investor are calculated by the
bank discount method, just like Treasury bills.

ParPP
360
PP
YCP =
n

Advantages

Relatively low interest rates

Flexible interest rates - choice of dealer or direct paper

Large amounts may be borrowed conveniently

The ability to issue paper gives considerable leverage when negotiating with banks

Disadvantages

Risk of alienating banks whose loans may be needed when an emergency develops

May be difficult to raise funds in the paper market at times

Commercial paper must generally remain outstanding until maturity - does not permit
early retirement without penalty