Treasury Bills issued by QCB

In January, the Qatar Central Bank (QCB) released Treasury Bills (TBills) totaling QR 2.5 billion in value, distributed over five separate issues worth QR 500 million each. These bills are carrying an interest rate of 5.0050 percent. Among the methods of promoting issuances announced by the QCB on Sep 21, 2022, was the auction, which was employed to issue treasury bills worth QR 500 million for a one-week term in January, expiring on Feb 7, at a 5.0050 percent interest rate. By periodically issuing Treasury Bills or short-term Islamic sukuk to local banks, central banks generally seek to control liquidity rates and the money supply in the market.

The Definition of Treasury Bills

The Central Bank issues Treasury Bills as a tool to regulate the money supply and influence interest rates. TBills are considered short-term debt securities with a typical maturity period of one year or less. The issues are regularly made on a monthly basis and have standard maturity periods of three, six, or nine months. These bills are commonly viewed as the lowest-risk investment option for investors.

The Functionality of Treasury Bills

Initially, the TBills are offered to the primary market, which comprises local banks, through an auction. The Central Bank issues the TBills to primary market members at a discounted price without a coupon or interest rate, and interest is not paid until the maturity date. Primary market members can make these securities available for purchase by investors in the secondary market. The seller of the TBills will receive the discounted amount from the purchaser, which is equivalent to the book value (price x volume) of the securities sold. On the maturity date, the holder of the TBills will receive the par value of the bills from the Qatar Central Bank. The difference between the purchase price and the par value is the investment return.

Investing in Treasury Bills

TBills are typically viewed as a low-risk investment option, with lower volatility than equities or bonds. When investing in TBills, the investor is almost certain to receive a capital gain, as the purchase price is always lower than the par value repaid at maturity. This makes TBills an attractive investment option for those looking to diversify their portfolio and balance risks across various asset classes. Once the initial purchase price is paid, the investor can expect a predictable return on investment if the TBill is held to maturity.

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