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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Debt Instruments and Government Securities

A DP client in Jaipur asks what Treasury Bills (T-Bills) are, since she saw them in the auction calendar. Which description is correct?

Treasury Bills are short-term government money market instruments, issued at a discount and redeemed at face value. They have maturities of 91, 182 or 364 days and pay no coupon, so the investor's return is the discount gained.

  1. ALong-term dated securities issued with coupons for over 10 years
  2. BShort-term money market instruments issued at a discount and redeemed at face valueCorrect
  3. CEquity instruments issued by the government to the public
  4. DSecurities issued by corporates with fixed half-yearly coupons

Explanation

T-Bills are short-term government instruments (91, 182 and 364 days) issued at a discount to face value and redeemed at par. They carry no coupon; the return is the difference between issue price and face value.

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