Download - Payments Quarterly June 2012

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Operator’s Spot Another investment option: Treasury Bills

Treasury Bills are short-term governmentdebt instruments of up to one year and aregenerally issued for periods of 91 days (3months) or 182 days (6 months). The Central

Bank is the agent for the Government inthe management of Treasury Bills. There isa Treasury Bill issue maturing almost everyweek and the government generally issuesnew Bills to replace the maturing ones. Anyindividual or company in Trinidad & Tobagocan purchase Treasury Bills.

The issue of Treasury Bills is done throughan auction procedure. Both competitiveand non-competitive tenders are permitted.Competitive tenders are submitted bymore knowledgeable investors who have

the experience and know-how aboutpricing. Less sophisticated investors cansubmit non-competitive tenders of up to

$100,000.00 whereby they agree to acceptthe average price determined in the auction. Treasury Bills can be bought and sold at theCentral Bank of Trinidad and Tobago.

Treasury Bills are traded (bought or sold) ona discount basis. This means that the priceof the Bill is equal to its face value less theamount of the discount.

To calculate the discount the followinginformation is needed:• date of purchase• date of maturity• discount rate• amount you wish to purchase

Let us assume a person wants to purchase$1,000 of Treasury Bills issue number 1293on November 8, 2010. Also, assume that

June 2012 Payments Quarterly

1 The Domestic Market Operations Department of the Central Bank handles these transactions during the hours of 8:00 a.m. to 2:30 p.m. each work day.

Here are 5 terms applicable to the Payments System:

1. Mobile banking is a term used for performing balance checks, account transactions, payments, credit applications and otherbanking transactions through a mobile device such as a mobile phone or Personal Digital Assistant (PDA).(Also known as M-Banking)

http://en.wikipedia.org/wiki/Mobile_banking

allows customers of a nancial institution to conduct nancial transactions on a secure website operatedby the institution, which can be a retail or virtual bank, credit union or building society. (Also known asOnline banking or E-banking)

http://en.wikipedia.org/wiki/Internet_banking

means any document, instrument or writing evidencing ownership of, or any interest in, the capital, debt,property, prots, earnings, or royalties of any person, or enterprise, and without limiting the generality

2. Internet banking

3. Security

of the front-end systems with their coreoperating systems varied from straight-through processing to manual le uploads.

E-readiness of CommercialBanks in Trinidad and Tobago(continued)

(e) Promotion of E-payments and theChallenges

All banks surveyed indicated they wereworking at promoting e-payments, while fourbanks identied specic penetration targets,ranging between 75-100 per cent. However,

banks identied several constraints to high

acceptance of e-payments. These included:(i) legal constraints; (ii) lack of technology tohandle e-payments; (iii) culture/tradition; (iv) thebenets of keeping a oat; (v) operational issues;

and (vi) the timing of clearance and settlement.

this issue matures on January 19, 2011 andthe discount rate is 0.35%. The number of daysbetween the purchase date and the maturitydate is 72.

The discount is calculated as follows:

Discount = Principal x Rate x Time / 100 = (1000 x 0.35 x 72) / (100 x 365) = $0.69

The price is the difference between the facevalue and the discount. In this example:$1000.00 - $0.69 = $999.31

The Central Bank regularly publishesinformation on Treasury Bill auctions in thenewspapers. Information on discount rates isavailable from the Domestic Market OperationsDepartment or online at www.central-bank.org.tt/content/treasury-bills.

Contributor:Domestic Market Operations Department

Central Bank of Trinidad and Tobago

Download - Payments Quarterly June 2012

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