Which investment vehicle is commonly used by public treasurers?

Public treasurers often utilize Treasury bills (T-bills) as their primary investment vehicle due to several key characteristics that align with their objectives. T-bills are short-term government securities that are issued by the U.S. Department of the Treasury, with maturities typically ranging from a few days to one year. This short-term nature allows public treasurers to manage cash flows effectively and ensure liquidity, which is essential for meeting their funding obligations and managing operational expenses.

Furthermore, T-bills are considered to be one of the safest investment options because they are backed by the full faith and credit of the U.S. government. This enhances the security of principal investments, making them particularly attractive for public treasurers who prioritize capital preservation.

In addition, the simplicity and transparency of T-bill auctions make them easily accessible and straightforward for public entities to invest in. This promotes efficiency in portfolio management, allowing treasurers to quickly adjust investments in response to changing cash needs or market conditions.

While other investment vehicles such as stocks, bonds, and real estate may provide opportunities for higher returns, they also carry greater risks, including market volatility, longer time horizons, and less liquidity. Thus, T-bills strike an optimal balance between safety and liquidity,