What is a treasury bill?
A treasury bill is a short-term loan you make to the government, for a few months up to just under a year. You are the lender and the government is the borrower. At the end, the government pays you back a little more than you put in, and that extra is your income.
The name sounds technical, but the idea is much like lending a friend money for a few months. The difference is that the friend here is the government, and how much extra you get back is fixed at the start.
Say Tanvir pays Tk 97,000 for a one-year bill with a face value of Tk 1 lakh. At the end of the year the government pays him the full Tk 1 lakh. The Tk 3,000 difference is his income. (The figures are only for illustration; the real price is set at auction.)
How it works
Treasury bills are the government’s short-term borrowing. Bangladesh Bank sells them at regular auctions on the government’s behalf. For ordinary investors there are three main terms: 91 days, 182 days and 364 days. Very short bills (such as 14 days) also exist, mainly for banks.
A bill pays no separate interest (coupon). It is sold at a discount, that is, for less than its face value, and at maturity the government repays the full face value. The difference between what you paid and what you get back is your income; expressed as an annual rate, it is called the yield.
The yield is set at auction. Banks and other participants bid, and the government decides how much to borrow and up to what rate it will accept, so the rate moves a little at every auction. Once you have bought, your rate is locked in until maturity.
A 364-day bill with a face value of Tk 100,000 bought at a 10% annual yield costs roughly Tk 91,000 today. A year later you receive Tk 100,000, an income of about Tk 9,000, on which tax is deducted at source. The rate is only an example; actual yields change from auction to auction.
The three main terms
- 91-day bill
- About three months. The shortest of the three; your money comes back soonest.
- 182-day bill
- About six months.
- 364-day bill
- About a year. To lend to the government for longer, there are treasury bonds.
How people buy them
The auction itself is mostly for banks, especially primary dealer banks. Individuals usually apply through a bank, which bids on their behalf or sells from bills it already holds. Many banks ask you to open a separate account for government securities (a BPID).
Minimum amounts and charges differ by bank; many sell in units of Tk 1 lakh (Tk 100,000). Unlike treasury bonds, bills are generally not traded on the stock exchange. If you need the money before maturity you would have to try selling in the secondary market through a bank, which is not always easy.
Why treasury bill rates matter beyond the bill
Treasury bill yields are treated as the benchmark “risk-free” short-term interest rate in the country, and bank deposit and lending rates tend to move with them. The reference rate Bangladesh Bank introduced for loans in 2023 (SMART) was itself calculated from treasury bill yields.
What return to expect
Treasury bill yields move a great deal with the state of the economy. In 2021, with banks holding a lot of idle cash, the 91-day yield fell below 1%. After interest rates were raised to fight inflation, yields passed 11% at the end of 2023 and reached about 12% on all three terms in mid-2025. From late 2025 into early 2026 they eased back to around 10%.
So past rates are no guide to future ones. Before buying, look up the latest auction results; Bangladesh Bank and the newspapers publish them after every auction.
To see your real gain, take out tax and inflation. In periods like 2021, bill yields were far below inflation, so the real return was negative.
Why people choose it
- Repayment is the government’s obligation.
- Short terms, from three months to a year.
- You know on the day you buy exactly what you will receive at maturity.
- Excise duty is generally not charged on it.
Points to weigh
- The rate changes every auction; when you reinvest at maturity, the new rate may be higher or lower.
- Buying is more involved for an individual than opening a bank deposit.
- Selling before maturity is not easy.
- When inflation is high, the real return can be low or negative.
Tax
Tax is deducted at source from the income (the discount) you earn on a bill. In recent years the rate for individuals has generally been 10%, and higher for institutions. The Income Tax Act 2023 and each year’s Finance Act or ordinance can change these rates.
This income is part of your total income. When you file a return, the tax already deducted is set against your total tax.
Tax rules can change with each year’s Finance Act. Before a big decision, check the latest rules or speak to a tax adviser.
How to get started
- Ask whether your bank sells government securities; primary dealer banks usually do.
- Open a government securities account (BPID). You will need your national ID, photographs, a bank account and your TIN if you have one.
- Decide on the term and amount, and submit a purchase request.
- Get the bank’s charges, and the auction and rate you bought at, in writing.
- Confirm which account the money will be paid into at maturity.
Check before you start
- Might I need this money before the bill matures?
- Have I looked at the latest auction yield?
- What is my actual income after the bank’s charges?
- Have I compared the after-tax return with an FDR or other options for the same term?
- Have I provided my TIN or proof of return so tax is deducted at the right rate?