Are you interested in treasury bills in 2020? In today’s topic, I will walk you through why you should have one and the latest treasury bill rate in Ghana.
Treasury bills are the most easily traded securities of the money market. The main reason why many people use it is due to its security and simplicity.
T-Bills are in essence used by the government to raise funds from the public.
Here, we refer to the Government of Ghana treasury bills, but many other governments issue equivalent securities.
What are the main types of treasury bills in Ghana?
As it has been stated earlier, treasury bills are short term. The various treasury bills listed on the Ghana money market are listed below:
- 91-Day 0r 3 month Treasury Bill.
- 182-Day or 6 month Treasury Bill.
- 365-Day or 1 year Treasury Bill.
For you to know how much interest can you earn from a treasury bill, you need to know the interest rate.
You need to take note of these forms of investment since the rate of interest on the principal amount may not be huge. However, the monthly interest or fixed rate set by BoG should be enough for some investors.
Don’t always yearn for higher interest rates since some of these low interest at a fixed rate on the principal amount can earn you a decent amount of money. The most important thing to look out for as an investor is the safety of your investment.
The chart below shows the current treasury bill rates as published by the Bank of Ghana (BoG) up till this week 16th December 2019:
Current Bank Of Ghana Treasury Bill Interest Rates For 2019/2020
|Date||91-Day Interest Rate||182-Day Interest Rate||364-Day Interest Rate|
|20th January 2020||14.7022%||15.1689%||17.8349%|
|13th January 2020||14.6935%||15.1727%||17.8349%|
|6th January 2020||14.6698%||15.1715%||17.8349%|
|23rd December 2019||14.6961%||15.1573%||17.8998%|
|16th December 2019||14.6969%||15.1490%||17.8964%|
|9th December 2019||14.6884%||15.1487%||17.8296%|
|2nd December 2019||14.6836%||15.1425%||17.8298%|
|25th November 2019||14.6984%||15.1376%||17.9189%|
|18th November 2019||14.6875%||15.1360%||17.9091%|
|11th November 2019||14.6879%||15.1294%||17.9197%|
|4th November 2019||14.6872%||15.1343%||17.9050%|
|28th October 2019||14.6850%||15.1398%||17.9051%|
|21st October 2019||14.6907%||15.1185%||17.9040%|
|14th October 2019||14.6916%||15.1372%||17.9119%|
|7th October 2019||14.6832%||15.1462%||17.9108%|
|30th September 2019||14.6899%||15.1455%||17.9081%|
|23rd September 2019||14.6839%||15.1425%||17.9106%|
|16th September 2019||14.6967%||15.1357%||17.9098%|
|9th September 2019||14.6794%||15.1232%||17.9098%|
|2nd September 2019||14.6777%||15.1379%||17.8503%|
|26th August 2019||14.6811%||15.1373%||17.8603%|
|19th August 2019||14.7170%||15.1447%||17.9203%|
|12th August 2019||14.7325%||15.1678%||17.9066%|
|5th August 2019||14.7325%||15.1698%||17.8968%|
|29th July 2019||14.7231%||15.1708%||17.8954%|
|22nd July 2019||14.7261%||15.1744%||17.8644%|
|15th July 2019||14.7296%||15.1724%||17.8784%|
|8th July 2019||14.7205%||15.1721%||17.9052%|
|1st July 2019||14.7438%||15.1999%||17.9162%|
|24th June 2019||14.7714%||15.2264%||19.8000%|
|17th June 2019||14.7567%||15.2436%||17.9228%|
|10th June 2019||14.7478%||15.2449%||17.9896%|
|3rd June 2019||14.8252%||15.3503%||17.9996%|
|27th May 2019||14.8584%||15.3834%||19.7000%|
|20th May 2019||14.9189%||15.4674%||18.0056%|
|13th May 2019||14.8706%||15.3536%||18.0255%|
|6th May 2019||14.7569%||15.3263%||18.0115%|
|29th April 2019||14.6688%||15.0669%||18.0105%|
|22nd April 2019||14.6634%||15.0684%||19.75%|
|15th April 2019||14.7078%||15.1005%||18.0472%|
|8th April 2019||14.7105%||15.1192%||18.0146%|
|1st April 2019||14.7266%||15.1646%||18.0964%|
|25th March 2019||14.7176%||15.1595%||18.0866%|
|18th March 2019||14.715%||15.1501%||18.1898%|
|11th March 2019||14.7071%||15.1474%||19.75%|
|4th March 2019||14.7085%||15.132%||18.0287%|
|25th February 2019||14.7079%||15.1324%||19.75%|
|18th February 2019||14.1888%||15.1258%||19.3827%|
|11th February 2019||14.7092%||15.1537%||18.1559%|
|4th February 2019||14.696%||15.1446%||18.2755%|
|28th January 2019||14.698%||15.1452%||18.2104%|
|21st January 2019||14.6908%||15.1122%||18.1602%|
|14th January 2019||14.6263%||15.0865%||16.5672%|
|7th January 2019||14.5963%||15.04456%||18.7341%|
Note: You can use online treasury bill interest rate calculators to calculate your actual earnings based on the amount invested and the maturity date.
Furthermore, there are other options available if you want to buy the treasury for longer years.
The Ghana treasury bills are short-term securities with maturities of one year or less issued by the Bank of Ghana (BOG).
You Must Know This
Treasury securities: These are also bonds that are issued, and it is those with the shortest maturity date that are called treasury bills. Those bonds that mature from two (2) to ten (10) years are called treasury notes. Note that these bonds have no default risk since they are backed by the government.
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Treasury bills are sold at a discount. The Government of Ghana uses this method to borrow money from individuals to embark on developmental projects.
In practice, the difference between the purchase price and the amount repaid at maturity is the interest paid to investors.
Fixed Deposit vs Treasury Bills
Most people have been wondering about the difference between fixed deposit and treasury bills in Ghana.
I will explain the differences between the two terms.
As I have already stated from the beginning, the treasury bill is an investment sold by the Bank Of Ghana for a certain period.
The amount of treasury bills sold is determined by the Bank of Ghana. And for that matter, it is only BoG that can directly sell treasury bills in Ghana.
However, other banks like Ecobank, GTBank, Stanbic bank, Cal Bank, Fidelity Bank, Zenith Bank, Data Bank, Access Bank, etc. can buy T-bills and resell on the market.
On the other hand, a fixed deposit is another form of investment issued by a bank to its depositors for a pre-determined period of time.
This form of investment is not controlled by the central bank. The amount of money invested and the duration of the investment is determined by the depositor while the interest rate is determined by the bank.
For a fixed deposit, both the principal and interest are paid at maturity, but the depositor can decide to withdraw his money before the maturity date.
You Must Know This
Maturity date: This is one of the most common terms in the financial sector. It simply means the date that your principal amount of the bond, note, T-bill, or other debt instrument is due to be paid. This is the final payment date.
The table below summarizes the answer to the question: What is the difference between Treasury bill and Fixed deposit?
Deference Between Fixed Deposit And Treasury Bill
|Treasury Bill||Fixed Deposit|
|Controlled by Bank Of Ghana||Controlled by Individual bank|
|Tax-free||Subject to Tax|
|Accepted by all banks as collateral||Not accepted by all banks as collateral|
|Interest rates are fixed for all||Interest rates vary from bank to bank|
|Investments are safer and secured||Security of investments depends on degree of solvency of the bank|
|Investmets cannot be rolled over||Can be rolled over at maturity|
|Amount invested is limited||No limit to amount invested|
|Interest can be claimed up-front||Interests are only paid at maturity|
How To Calculate Treasury Bill Interest (2020 Tips)
To calculate how much interest you earn on a treasury bill, you have to take the maturity days and the interest rate into consideration.
Since the interest rate is quoted in percentage, divide the rate by 100.
The next thing to do is to multiply the result by the amount you invested.
That will be the interest on the treasury bill for the whole year.
For a 91-day treasury bill investment, divide the interest you had for the year by four (4).
Thus, 3 months x 4 = 1 year.
Similarly, for a 182-day T-bill, divide by two (2).
How Much Interest Can You Earn From A Treasury Bill?
To know how much interest you will earn from a treasury bill investment, you need to go through an example of the interest rate calculation below:
Example of treasury bill interest rate calculation.
Let’s use the interest rate for Monday 5th August 2019, which is 14.7325% for 91 days.
Assuming you are investing GHS3000 in a T-bill at the prevailing rate of return of 14.7325% for 91 days.
The first step is to divide the rate by 100 percent.
That is 14.7325%/100% = 0.147325.
The next step is to multiply the result by the amount we invested. Thus 0.147325 x GHS3000 = GHS441.975.
Hence, the interest on the treasury for the whole year is 441.975 Ghana cedis.
That is how much you earn from the treasury bill for the year.
For the 91-day investment, our interest you earn will be GHS441.693/4 = GHS110.4938.
Also, the interest you earn for a 182-day investment is GHS441.693/2 = GHS220.9875.
You Must Know This
Interest payments: The amount that is determined by the interest rate, and it is always based on the principal amount and the duration of the investment.
Percentage yield: This is the ratio of the experimental yield to the theoretical yield and the product multiplied by 100%. Per this definition, if the theoretical yield is the same as the experimental yield, then the percentage yield is 100%.
Ecobank Treasury Bill For All
The Ecobank TBILL4ALL is a decent mobile money investment platform that enables Ghanaians to buy and manage the treasury bills issued by the Government of Ghana.
This means that if you have an Ecobank account, you can purchase treasury bills easily using the MTN mobile money system.
Note that with the TBILL4ALL, you don’t need any bank account before buying your T-Bills.
Follow these steps to register for the Ecobank TBILL4ALL:
- Enter *770# on your mobile phone to signup.
- Follow the on-screen prompt and provide the necessary details.
- Select your username and password
- Sign in after you have successfully registered and buy treasury bills.
Your mobile money wallet will be credited at maturity, and you may also choose to reinvest the matured sum on the same Ecobank TBILL4ALL platform.
For you to know your bill has been purchased, a text message will be sent to your phone. This is an indication that the transaction is successful.
The interest calculator allows you to have a fair idea of your return on investment at maturity.
Moreover, the rediscount feature allows you to terminate your investment before maturity.
Remember, the minimum amount required to buy a treasury bill on this platform is GHS5.
The Objectives Of The Treasury Bills By Bank Of Ghana
The aim of treasury bills is to obtain short-term financing at the lowest possible cost.
Due to the high liquidity of the letters and the low risk associated with them, the interest that the state must pay to use this method of financing is not high.
The country or government that issues public debt with treasury bills seek to obtain funds from the markets by committing to their return together with previously established interests.
Due to the nature of these financial assets, it is typical for the interest receivable on an annual basis to be normally fixed.
In addition, the amount and the date of collection will be previously specified at the beginning.
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Advantages Of Treasury Bills In Ghana
This type of public financial assets has a substantially lower level of risk than others from the private sector. That is the reason why the Treasury bills have lower profitability levels.
They are considered the financial assets with the most moderate risk that exists in the market.
Treasury bill (T-Bill) is the main instrument that a country has to obtain financing in the short term. They do not usually offer annual coupons because of their short duration.
That is, as we have said, it is less than 12 months. The most common is that the letters have terms of 3, 6, and months.
In summary, the importance of the treasury bills are:
- They tend to have a lower risk. They usually have lower profits depending on the treasury bill rate in Ghana.
- For treasury bills, the interest is higher as compared to a bank savings account.
- Its maturity is short term.
- You can use your T-Bills as collateral.
- You can decide to reinvest both your principal and interest or choose to withdraw your interest but rollover your principal.
The Treasury bills are issued at a discount. At the end of the transaction, the difference between the purchase price and the value of the bill is the interest you earn.
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Why do investors invest even when the profitability of the treasury bills is negative?
The reason why there are still investors willing to invest in treasury bills is that they take into account the type of inflation at a specific time to calculate whether or not they can get profit for their money with the treasury bills.
If the inflation is below the interest rate at which the treasury bills are issued, even if it is negative, the profitability of the treasury bills will continue to be positive.
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Who Can Buy Treasury Bills In Ghana?
There are no restrictions.
You can buy the T-Bills on either the primary or secondary markets.
Now you know the current treasury bill rate in Ghana and the various means of maximizing your gains.
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Definition Of Terms You Must Know
Treasury bonds: These are government securities with long term, and you earn interest until maturity. You are also paid an amount equal to the principal you started the investment with. Because T-Bonds are backed by faith and credit of the (federal) government, it is an excellent investment to make.
Treasury notes: The treasury note is an intermediate bond or currency note issued by the government. They are debt securities available from the government at fixed interest rates at either competitive or noncompetitive bid.
Face value of a treasury bill is the nominal value or worth of the bond and hence the amount paid at maturity.
Savings bonds have a fixed interest rate over a fixed period.
Government bonds: It is also called a sovereign bond and is issued with a promise by the government to make interest payments periodically called coupon payment. The face value is then paid at maturity.
Fixed income securities: These are other forms of debt instruments with returns in the forms of fixed or regular interest payments. The principal is repaid as soon as the principal reaches maturity. Bonds, T-bills, and the like are forms of fixed-income securities.
How has been your experience so far especially going into 2020?
Share your thought in the comment section below.