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Treasury Bill

A treasury bill is a government domestic debt security issued by the Ministry of Treasury and Finance with a maturity of less than one year at issue, usually sold at a discount. Law 4749 on Public Finance and Debt Management classifies government domestic debt securities with a maturity under one year as treasury bills and those of one year or more as government bonds.
Contents
  1. 1.Key points
  2. 2.Formula / calculation
  3. 3.Worked example
  4. 4.Interpretation
  5. 5.Pitfalls
  6. 6.Official sources
  7. 7.Frequently asked questions

Key Points

  • A bill pays no coupon; it is sold below its face value and redeemed at face value at maturity.
  • Thanks to the state guarantee and short maturity, bills are among the lowest-risk lira instruments and form a large part of money market and short-term debt fund portfolios.
  • if sold before maturity the price moves with market rates and the return can differ from what was expected.

Formula / Calculation

Price = Face value / (1 + Rate × Days / 365). Return = (Face value − Purchase price) / Purchase price. Short-term debt instruments issued by private companies are called commercial papers.

Worked Example

Illustrative

A bill with TRY 100,000 face value and 182 days to maturity priced at a 36% simple annual rate costs 100,000 / (1 + 0.36 × 182 / 365) ≈ TRY 84,777. An investor holding to maturity earns about TRY 15,223 gross.

The figures are hypothetical values chosen to explain the concept; they are not data for any real fund, stock or market.

Interpretation

Thanks to the state guarantee and short maturity, bills are among the lowest-risk lira instruments and form a large part of money market and short-term debt fund portfolios. Auction results reflect short-term rate expectations.

Pitfalls

if sold before maturity the price moves with market rates and the return can differ from what was expected. Returns may be subject to withholding tax, and rates change periodically, so check the current rules. In high inflation a nominal return can still be a real loss.

Official Sources

Official regulation and sources the definition is based on.

Pages Where This Term Appears

Related Terms

Frequently Asked Questions

A treasury bill is a government domestic debt security issued by the Ministry of Treasury and Finance with a maturity of less than one year at issue, usually sold at a discount.

Price = Face value / (1 + Rate × Days / 365). Return = (Face value − Purchase price) / Purchase price. Short-term debt instruments issued by private companies are called commercial papers.

Prepared by: Yatırımcı.AI Research TeamLast reviewed: Method: MethodologyEditorial policy