Final answer:
When the government issues a T-bill, it borrows money from the purchaser and holds a debtor position, promising to pay back the full face value at maturity.
Step-by-step explanation:
When the government issues (sells) a T-bill, it is borrowing money to the buyer of the T-bill and it is taking a debtor position in the asset. Treasury bills, or T-bills, are short-term debt obligations of the U.S. government with maturities of 13, 26, or 52 weeks and a minimum denomination of $10,000. T-bills are sold at a discount from their face value, and upon maturity, the government pays the holder the full face value. The difference between the purchase price and the face value represents the interest earned for the investor. They are considered among the safest investments since they are backed by the full faith and credit of the U.S. government. Despite offering lower interest rates, T-bills are a popular asset for investors and financial institutions, like banks, as they provide a predictable income stream and add low-risk assets to their portfolios.