Key takeaways
- Treasury bills are also known as T-bills and they are short-term government-backed financial instruments issued by the CBN.
- Bonds are investment securities where investors lend money to the government or corporate entities for a specified period.
- Both treasury bills and bonds are investment securities issued by the government to raise funds.
Differences between Treasury Bills and Bonds
| # | Treasury Bills | Bonds |
| 1 | They are short-term investments, usually less than a year. | They are long-term investments, typically between 1-20 years. |
| 2 | Interest rates are usually very low. | Interest rates are comparatively high. |
| 3 | There is no interval payment of interest. | Interest rates are paid in intervals as agreed. |
| 4 | There are fewer price fluctuations because they mature in less time. | Prices are likely to fluctuate more in bonds due to a longer maturity period. |
| 5 | They are issued at a discounted price. | They are not issued at a discounted price but interests are paid in intervals and the face value is paid at the end of the maturity period. |
What are treasury bills?
Treasury bills, also known as T-bills are short-term financial instruments, backed by the government and issued by the CBN. T-bills are offered at a discount. The maturity date is usually less than a year and interest rates are comparatively low.
>> Read more about Treasury bills in Nigeria.
What are bonds?
Bonds are investment securities where an investor lends money to a government or company for a specified period. Interests are usually paid at fixed intervals as indicated by the agreement. Governments/companies issue bonds when they need money for new projects or expenditures. The maturity date is usually for a long time, typically between 1-20 years when the money is paid back to the investors as agreed.
>> Read more about How to invest in bonds.
Types of Bond
- Bond Fund
- Corporate Funds
- Government Bonds
- Municipal Bonds
- Junk Bonds
Similarities between Treasury Bills and Bonds
- They are both investment securities.
- They are government-backed securities, hence low-risk investments.
- They can both be bought and sold at secondary markets.
- They are bought through a bank or brokerage firm.
- They are both issued by the government to raise funds.
Which is better, Treasury bills or bonds?
Treasury bills and bonds both have their peculiarities and either can work for you depending on the kind of investment you are looking for and how long you are willing to wait. If you are looking to make more return on your investment, bonds are likely to give you more interest.
Which is less risky, Treasury bills or bonds?
Treasury bills and bonds are both low-risk investments. Treasury bills have a shorter maturity rate and there are no price fluctuations. Bonds have a longer maturity rate and are subject to price fluctuations. Hence, treasury bills are less risky.
Which has a shorter maturity rate, Treasury bills or bonds?
Treasury bills are usually less than a year while bonds can be up to 20 years. Treasury bills have a shorter maturity rate.
Bottom Line
Treasury bills and bonds are suitable for low-risk investors and they can help you begin your investment journey. It is important that you compare ratings, and do your research and the risks involved before committing to any kind of investment.
ALSO READ
Mutual Funds vs Treasury Bills
Commercial Paper vs Treasury Bills
GLOSSARY
