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Elham AbolFateh

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Finance Ministry issues EGP 2.2 bln in T-bills on Monday

Monday 12/February/2018 - 05:19 PM
Sada El Balad
Hassanein Tayea
The Ministry of Finance issued treasury bonds worth a total of EGP 2.250 billion.
According to the Finance Ministry’s website، 5-year maturity treasury bills were issued at EGP 1.250 billion، at an average interest rate of 14.438%.

The Finance Ministry also pointed out that 10-year maturity treasury bills were issued for EGP 1 billion at an average interest rate of 13،871%.
The state’s budget deficit is expected to reach EGP 370 billion by the end of the current fiscal year، as a result، the CBE offers bills and treasury bonds، as well as government debt instruments، on behalf of the ministry، in order to cover the deficit.

Egypt receives financial aid in the shape of grants and loans from Arab countries to cover the deficit.

Noteworthy، a Treasury bill (T-Bill) is a short-term debt obligation backed by the Treasury Dept. of the U.S. government with a maturity of less than one-year، sold in denominations of $1،000 up to a maximum purchase of $5 million. T-bills have various maturities and are issued at a discount from par، according to Investopedia.

When an investor purchases a T-Bill، the U.S. government effectively writes investors an IOU; they do not receive regular interest payments as with a coupon bond، but a T-Bill does include interest، reflected in the amount it pays when it matures.

The longer the maturity date، the higher the interest rate that the T-Bill will pay to the investor.

-Purchase Process-
The pricing of T-Bills is unique among government debt issues; rather than providing interest payments like Treasury Bonds or Notes do، T-Bills are sold at a discount and the entire return is realized upon maturity.

The interest rate earned on T-Bills is equal to the difference between the purchase price and maturity value، divided by the maturity value.

New issues of T-Bills can be purchased at auctions held by the government; previously issued ones can be bought on the secondary market.

T-Bills purchased at auctions are priced through a bidding process. Bids are referred to as "competitive" or "non-competitive."

A competitive bid sets a price at a discount from the T-Bill's par value، letting you specify the yield you wish to get from the T-Bill.

Non-competitive bid auctions allow investors to submit a bid to purchase a set dollar amount of the Bills. The yield they receive is based upon the average auction price from all bidders.

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