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Demystifying Treasury Bills

cedis-500x333.jpegA treasury bill is a short-term investment product (from 91 days to 365 days) offered by the Bank of Ghana on behalf of the Government. Treasury bills are backed by the credit of the Government. Purchasing a treasury bill is lending money to the Government.

Anyone above 18 years can buy treasury bills. However, you can buy treasury bills for a person less than 18 years (a minor) and hold it in trust for him or her. It can also be held in trust for family members, friends or organisations.

Upon maturity, the government will repay the amount it borrowed plus the determined interest rate given at the time it borrowed (or the time you bought the Treasury bill). The interest rate payable depends on how long you lent your money for.

The good and interesting thing about lending to the Government through the purchase of treasury bills is that you may collect your interest upfront on the day you purchase the treasury bills. The money given you upfront is referred to as the discount value. The discount value is always slightly lower than the interest value that would have been paid on maturity date.

If you decide to lend money to government of Ghana, there are three things you may do after lending the money and waiting till maturity date:

  • You can roll over both the principal and interest.
  • You can take all your original money together with the interest.
  • You can continue with the investment (roll over the principal) and take your interest.

  Some of the key benefits of Treasury Bills to investors include the following:

  • No transactions cost. You do not pay anything.
  • Treasury Bills can easily be converted into cash.
  • Treasury bills are risk free.
  • Interest earned is higher than bank savings account rates.
  • They can be used as collateral.

The Treasury Bills rates for this week, Monday 25th January, 2016 to Friday 29th January, 2016 is summarized below:

Period                 Discount Rates         Interest Rates

91 – Day                21.4326%                  22.6460%

182 – Day              21.7896%                  24.4537%

Please remember the value of investments can go down as well as up and you may not get back the amount you initially invested. If you have any doubts about which investment product is right for you please contact your financial adviser.


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