Money Market

Markets in which “Money Market Securities” are traded. Short-term interest-bearing assets with maturities of less than one year.

Treasury bills

What is a Treasury Bill?

Treasury bill is a short term debt instrument issued by the Government of Sri Lanka under the Local Treasury Bill Ordinance No. 8 of 1923 (as amended) when it raises domestic public debt for budgetary purposes.

Who Issues Treasury Bills?

As an Agent of the Government of Sri Lanka, the Public Debt Department of the Central Bank of Sri Lanka (CBSL) issues the Treasury bills and repays maturity proceeds on maturity.

  

Authority to Issue Treasury Bills

In terms of annual borrowing targets specified in the Appropriation Act which is approved by the Parliament annually, the Government of Sri Lanka is authorized to issue Treasury bills.

What Benefits Can An Investor Derive by Investing in Treasury Bills?

• It is an absolutely risk free investment, since it is issued by the sovereign government. Hence, they are called gilt-edged securities meaning that they are covered by gold.
• You can get the highest rate of interest since the yield rates are determined in the market.
• Since these bills are tradable in the secondary market, you can obtain instant liquidity by selling them in the market.
• All receipts of maturity proceeds and capital gains are fully repatriable.
• You could also have a joint investment with some other person or persons. Hence, it is a very good way to share your investments with loved persons.
• You are not subject to further taxation, since a withholding tax of 10 percent is charged at source is the final tax.
• No stamp duty is payable on these bills.
• You can get the best service from the CBSL which maintains your investment in its state of the art, Scripless Security Settlement System and the fully automated Central Depository System (CDS).

What is the Availability of Treasury Bills?

Foreign investors can purchase up to 10 % of the total outstanding Treasury

bills at any given time. Eg. As at April 30, 2008, Treasury bill outstanding

stock was Rs. 340 bn. Accordingly, Rs. 34.0 bn. is available for foreign

investors.

What Types of Treasury Bills Foreign Investors Can Purchase?

• Eligible foreign investors are permitted to purchase Treasury bills issued by the Government of Sri Lanka from direct placement/primary auctions through PDs.
• Foreign investors are permitted to enter into Repo/Reverse Repo transactions with eligible investors only, using Treasury bills purchased under this scheme as collateral.
• Foreign investors are permitted sell Treasury bills in the secondary market at any time.

How Can An Investor Apply for Treasury Bills?

• You can purchase Treasury bills at any time through Primary Dealers (PDs) or Licensed Commercial Banks (LCBs) registered with the CBSL. PDs are the institutions appointed by the CBSL for trading in Government securities. Contact details of these institutions are given below.
• You can purchase Treasury bills by sending bids to the primary auctions through PDs or through direct placements.
• In order to make arrangement for fund transfers, you can advise your own bank to open a Rupee account named “Treasury bill Investment External Rupee Account - 2 (TIERA - 2)” in an LCB in Sri Lanka.
• After completing the transaction, your agent (LCB/PD) will open a security account for you in the CDS maintained by the CBSL. This account is debited /credited simultaneously based on your tradings in the market.

How Can An Investor Collect Maturity Proceeds?

Maturity proceeds relating to Treasury bills are credited on due dates directly to

your account through your agent. The participants of the CDS are responsible to

pay dues to you on due dates.