Iraq Expects to Step Up T-Bill Activity in 2010!!!!!!
This is the article we have been waiting for!!!!
BAGHDAD, March 10 (Reuters) – Iraq expects to step up its treasury bill activity in 2010 to help plug continuing budget deficits and foster a secondary treasury market, the Central Bank and Finance Ministry said in a submission to the IMF.
This paragarph tells us that the government of Iraq is using other measures to accumulate additional revenues to support the revaluation of the dinar.[/
Definition of Treasury Bills: Treasury bills (or T-Bills) mature in one year or less. Like zero-coupon bonds, they do not pay interest prior to maturity; instead they are sold at a discount of the par value to create a positive yield to maturity. Many regard Treasury bills as the least risky investment available to U.S. investors.
Why Issue T-Bills?
What Does Treasury Bill - T-Bill Mean?
A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations of $1,000 up to a maximum purchase of $5 million and commonly have maturities of one month (four weeks), three months (13 weeks) or six months (26 weeks).
T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder. Investopedia explains Treasury Bill - T-Bill
For example, let's say you buy a 13-week T-bill priced at $9,800. Essentially, the U.S. government (and its nearly bulletproof credit rating) writes you an IOU for $10,000 that it agrees to pay back in three months. You will not receive regular payments as you would with a coupon bond, for example. Instead, the appreciation - and, therefore, the value to you - comes from the difference between the discounted value you originally paid and the amount you receive back ($10,000). In this case, the T-bill pays a 2.04% interest rate ($200/$9,800 = 2.04%) over a three-month period.
Iraq also wants to promote the development of foreign exchange markets outside the framework of regular dollar auctions currently conducted by the Central Bank, including an interbank market and dinar forward market, the submission said.
The country’s letter of intent to the International Monetary Fund can be accessed at http://www.imf.org/External/NP/LOI/2010/irq/020810.pdf.
In the submission for a $3.6 billion standby arrangement, dated Feb. 8, Iraq said the country only now emerging from years of sectarian slaughter that followed the 2003 U.S.-led invasion would not return to a budget surplus until 2012.
They are telling us here that they have not taken the loan, and they don't plan to do so, because they are using T-bills to support themselves in troubled times until they revalue the dinar! Great news folks!
“As our financing needs in 2010 will still be substantial, we will step up our efforts to mobilize domestic financing through the Treasury bill market,” Iraq’s Central Bank head and finance minister wrote.
“To that end, we will conduct regular auctions, and refrain from cancellations, while allowing interest rates to be determined by the market. This will have additional benefits by determining a benchmark interest rate, while the development of a secondary market for treasury bills will allow banks to improve their liquidity management.” They said the country planned to introduce a sales tax, as a precursor to a Value Added Tax, “in the coming years”.
Iraq’s gross domestic product expanded by 4 percent in 2009 compared with almost 10 percent the year before, the submission reported. GDP growth would rise to almost 7 percent this year and 7.5-8.0 percent in 2011 and 2012, it said.
That improvement would be rooted in an increase in Iraqi oil output to 3.1 million barrels per day by 2012, from around 2.5 million bpd now, and exports of 2.5 million bpd, compared to just over 2 million bpd now.
Amongst other things, the submission said Iraq’s central bank planned to create a foreign exchange market outside the framework of regular dollar auctions now conducted by the bank. The bank uses the auctions to set the exchange rate, which has been held at 1,170 dinars per dollar for many months.
“To improve the functioning of foreign exchange auctions, we plan to develop organized exchange markets outside the central bank, including an interbank foreign exchange market,” it said.
“Our aim is to establish a forward market in Iraqi dinars in the near future.” (Reporting by Michael Christie; Editing by Missy Ryan)
Ok, I think I just sharted! Let me check. Yep, I just sharted myself!!! Boys and girls this is the prelude to the Dorthy meeting the Wizard and the end of the yellow brick road! It doesn't get any clearer than this! The CBI is mapping out the "action plan" to drop the preverbial "RV" on the world! :lol:
Yabba Dabba Doo! Pack your bags we are getting ready to go onthat cruise! Yes!!!
http://www.theiraqidinar.com/iraq-ex...ivity-in-2010/
