Money Market Instruments: Treasury Bills

Study Notes

Treasury Bills

T-bills are short-term notes from the Philippine government with maturities of 91, 182, and 364 days.
Weekly auctions for 91 and 182-day T-bills; 364-day T-bills auctioned monthly.
Purchases can be made directly via auctions or through the secondary market.
Bidders can submit competitive bids (risk of non-allocation) or noncompetitive bids (secured at average price).

Certificates of Deposit

CDs are issued by federally chartered banks representing deposited funds with specific returns over a fixed period.
Range of maturity rates from 30 days to six months or longer, face value varies.
Early withdrawal usually incurs penalties; some CDs may be sold to another investor before maturity.

Commercial Paper

An unsecured promissory note used in global finance with a maturity of up to 270 days.
Issued by large corporations to meet short-term obligations like payroll.
Depends on the issuer’s creditworthiness due to lack of collateral; only firms with excellent credit ratings can sell competitively.
Priced at a discount from face value, lower interest rates compared to bonds, and interest rates fluctuate with market conditions.

Bankers' Acceptances

Instruments created by nonfinancial corporations but underwritten by banks, indicating future payment.
Utilized primarily in financing foreign trade or purchasing on credit, also aids in inventory financing.
Maturities typically range from one to six months, with banks acting as guarantors considering the issuer's creditworthiness.

Repurchase Agreements

Repos are agreements where Treasury securities are sold with a promise to repurchase at a higher price later.
Considered the most liquid of money market investments, with maturities ranging from 24 hours to several months.
Function similarly to bank deposit accounts, facilitating the transfer of excess cash for corporations.

Purpose of the Capital Market

Issuers of capital market securities differ significantly from investors purchasing these instruments.

Description

This quiz explores the key aspects of Treasury bills (T-bills) issued by the Philippine government. Learn about their maturity periods, auction processes, and purchasing methods. Test your knowledge on short-term government securities.