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3/23/2018 TREASURY BILLS 1/6 TREASURY BILLS By AP Faure Definition treasury bill, usually abbreviated to TB or T-bill, is a short-term debt obligation of the central government. It is therefore neither a bill of exchange nor a promissory note, but represents a charge on the revenues and assets of the Republic of South Africa. A treasury bill is a security of great simplicity resembling a bank note. The main difference is that it is a note payable not at sight, but on a certain date in the future. The simplicity of the treasury bill is suggested on the “face” of the bill (the face is now electronic – see below). It contains the following information: Issue date Maturity date Nominal (face) value, which is the amount payable to the holder on maturity date From 2000 a process began to eliminate the physical handling of scrip and to facilitate the settlement process; it has culminated in dematerialisation and electronic settlement. Two versions of TBs issued in the past accompany this text. Historical background The first treasury bill was created in England in March 1877. Prior to the formation of the Union of South Africa the first issue took place in the Colony of the Cape of Good Hope during the financial year July 1881 / June 1882. The first issue in the United States took place in December 1929. The treasury bill has always played a central part in the South African money market since it was first issued. It was not the first money market instrument created (this honour the trade bill no doubt had), but it certainly preceded the main instruments of the money market, ie bankers’ acceptances, negotiable certificates of deposit, Land Bank paper and commercial paper (the latter is due to become a mainstream instrument). The 91-day (and recently the 182-day) treasury bill has been issued by means of weekly tender on Fridays, by the Reserve Bank on behalf of the Treasury, since 1958. Other term treasury bills have also been issued by the Reserve Bank on a tender basis, but these issues have been sporadic and for monetary policy purposes. The treasury bill is the preferred instrument for the open market operations of the Reserve Bank, and for access to central bank accommodation. The method of central bank accommodation has changed on many occasions in the history of South African central banking, and in this regard the paper has been discounted with the Reserve Bank, provided as collateral against overnight loans provided by the Bank, and sold under repurchase agreement (repo) to the Bank. Purpose of issue Treasury bills are issued for two main reasons: to fund part of the government budget deficit and for monetary policy purposes (in that they are the main instrument used by the banks to acquire accommodation from the Reserve Bank). As noted earlier, the Reserve Bank markets treasury bills on behalf of the
3/23/2018 TREASURY BILLS 2/6

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