Treasury Bills are issued under the provisions and guidelines of the Public Finance Management Act, of 2017. Treasury Bills issued under this Act are exempt from withholding tax, stamp, and transfer duties.
By Avite Mbabazi
Treasury bills also known as T-bills are issued by central banks around the world to raise funds for financing different public projects and paying off debt. Treasury bills are considered one of the safest investments but offer relatively low returns on investment compared to other securities such as mutual funds.
In Eswatini, in addition to providing funding for the government and encouraging the development of domestic money and capital markets, treasury bills are a means to provide an investment alternative with no risk of default for individuals and institutional investors. Moreover, Treasury Bills issued under the Public Finance Management Act, of 2017, are exempt from withholding tax (PAYE), stamp, and transfer duties.
Treasury bills are issued at a discount rate from the par value or face value, meaning the purchase price is less than the face value of the bill. For example a E10, 000 bill might cost an investor E9, 500 to purchase. At maturity the investor is paid the face value amount of E10, 000, making the difference between the purchasing price and the face value price of the interest earned.
T-bills are issued through auctions which are open to all willing bidders, including commercial banks, non-banking financial institutions, and stockbrokers, corporate and individual investors. Bids are categorized into two: competitive bids and non-competitive bids. Competitive bids are submitted by applicants who want to be allotted securities only at the discount rate specified in their application, whereas noncompetitive bids applicants are allotted securities at the weighted average discount rate from the accepted bids by competitive bidders.
Non-competitive bids, furthermore, allow the general public to participate in government treasury bills auctions without the in-depth market insight that institutional investors possess. According to the Central Bank of Eswatini, the minimum bid for non-competitive bids is E10, 000 while the figure is set at E5, 000,000 for competitive bids.
“Treasury Bills auctions are announced a week in advance and bidding is open until 11:00 hours. Wednesdays. Bids may be submitted directly to the Central Bank’s Domestic Debt Unit or through Primary Dealers.” States the Central Bank of Eswatini.
Additional information sourced from the Central Bank of Eswatini
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