What is the rate of interest investing in treasury bills?
Treasury Bills (T-Bills) do not carry a fixed interest rate. Instead, they are zero-coupon instruments issued at a discount and redeemed at face value upon maturity. The return—or effective interest—is the difference between the purchase price and the face value.
How T-Bill interest is determined?
- Issued at discount: No interest is paid during the term.
- Matures at face value: The gain is realised at maturity.
- Effective yield: Calculated based on the difference between issue price and maturity value, annualised for comparison.
Example
Let’s say you purchase a 91-day T-Bill with a face value of ₹100 at ₹99.50:
- Interest earned: ₹100 - ₹99.50 = ₹0.50
- Effective 91-day yield: (0.50/99.50) × 100 = 0.503%
- Annualised yield: (0.503 × 364/91) ≈ 2.012%
What if...
| Scenario | Resolution |
|---|
| You’re unsure of the yield | Check the RBI auction results or FYERS Debt Market portal for current discount rates. |
| You want periodic interest | T-Bills don’t offer that; consider G-Secs for regular coupon payments. |
Use FYERS' bond yield calculator or consult RBI’s weekly auction circulars to stay informed about live rates.
Last updated: 26 Jun 2025
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