Treasury Direct (http://www.Treasury Direct.gov/) is an electronic marketplace and online account system where investors may hold and conduct transactions in eligible book-entry Treasury securities. The Treasury Direct system is run by the Bureau of the Public Debt section of the U.S. Treasury Department, a branch of the federal government. Investors are able to participate in Treasury auctions and purchase debt securities, including U.S. savings bonds directly from the U.S. Treasury. For buying government debt securities, this program is relatively inexpensive and trouble-free. Read on to learn more about how it works and how you can invest. (For background reading, see Creating The Modern Fixed-Income Portfolio.)

How to Buy and Conduct Transactions at
Treasury Direct
Before transacting through Treasury Direct, investors must apply for an account through the online application portal. The process is simple and can be completed in 10 minutes. Investors must have a valid Social Security number, a U.S. address and an account at a U.S. depository financial institution that will accept debits and credits using the Automated Clearing House method of payment.

Eligible securities include Treasury bills, Treasury notes, Treasury bonds, Treasury inflation-protected securities (TIPS), etc. Buying is simple. Once you log on, you can click directly to purchase express, the online buy-order entry system. You'll be prompted to select the owner of the security, as many investors buy Treasuries for gifts and other charitable transfers. You'll also select the product type or term, source of funds and the amount of purchase. You can schedule the purchase for whenever you like and how often you like, although dates are subject to availability. The system will allow you to review your order before submitting it. Savings bonds are usually issued to your account within one business day; T-bills, notes, bonds and TIPS are issued within one week of the auction date. (For related reading, see 20 Investments You Should Know: Treasuries.)

Transfers into Treasury Direct are permissible and are initiated at the outgoing firm, unlike the ACAT transfer process for broker-to-broker transfers, which are initiated at the receiving firm.

Once T-bills have matured, their proceeds can be easily reinvested. Simply select the "schedule repeat purchases" option and then choose the number of repeat purchases and their frequency after you have finished entering the registration and purchase information for your transaction.

Maturing notes and bonds may also be reinvested.

Your account is subject to a number of restrictions. The minimum purchase amount for savings bonds is US$25 per person per year in penny increments up to $5,000. For T-bills, notes, bonds, and TIPS, an investor may submit noncompetitive bids from US$100 up to $5 million for each security type in $100 increments. Visit Treasury Direct: Learn More About Transaction Restrictions for additional insight.

Treasury Auctions Through
Treasury Direct
Treasury Direct account holders can also participate in Treasury auctions, which are conducted approximately 200 times per year. The first step in the auction process is the announcement of an upcoming auction, which is generally released four to five business days beforehand. This step discloses the number of bonds that the Treasury is selling, the date of the auction, maturity date, terms and conditions, eligible participants, and competitive and noncompetitive bidding close times. Noncompetitive bids guarantee that investors will get the full purchase amount of the security at the yield determined during the auction by competitive bidding. Competitive bids specify the yield expected for a security. (For more insight, see Basics Of Federal Bond Issues.)

The second step of the auction process is the auction date, when the Treasury reviews all bids received to ensure compliance with all applicable rules. All compliant non-competitive bids are accepted up until issue day, if properly postmarked. The final step of the auction process is the issuance of the securities. Securities are deposited to owners and payment is delivered to the Treasury on issue day.

Selling and Transferring Through Treasury Direct
Treasuries can be easily sold through the SellDirectSM interface. Thirteen-Week and 26-Week bills, notes, bonds and TIPS are eligible for sell orders in $100 increments. Investors simply select the issues, amounts and payment destination. Treasury Direct forwards your sell instructions to the Chicago Fed, which solicits bids from up to three dealers. Your bonds go to the highest bidder. Your account will be assessed a $45 fee for most sell transactions.

To transfer Treasuries out of your account, a Transfer Request Form must indicate the correct routing number, bank name, special handling instructions and be submitted to Treasury Direct. Transfers must be in $100 increments and include bills, notes, bonds and TIPS.

To redeem a savings bond, simply click the "Redeem" button found near the bottom of the "Current Holdings" page. You will need to specify whether it is a partial or full redemption and furnish the payment destination where you desire the redemption proceeds to be deposited. The redeem button will not appear on the holdings page if there are no eligible bonds in your account.

Guidance for Treasury Direct Account Holders
The easiest way to obtain current prices on Series EE, E, I, and savings notes is to use the "Savings Bond Calculator" on the Treasury Direct website. You will need to enter the series and denomination of your bond, along with issue date. The calculator provides information on current rate of interest, next accrual date, final maturity date and year-to-date interest earned.

Through the SmartExchangeSM interface, paper bonds may be converted into electronic book-entry Treasury Direct securities by trading them for the electronic version of the same series and issue date in a special conversion linked sub-account. Simply notify Treasury Direct and it will provide an invitation to convert to electronic form.

Your account can be funded with payroll deductions through your employer or direct deposits from your bank. The money will sit in your account and be used to fund future purchases. The balance is known as the "0% Certificate of Indebtedness" (C of I) feature of your TD account and, not surprisingly, pays no interest. Also, purchases must be funded by either the C of I or your bank, but not both.

Conclusion
Treasury Direct offers individual investors the opportunity to purchase Treasury securities directly from the U.S. Treasury. Although there are some limitations, this program is very reasonably priced and simple to use. And, the overwhelming majority of participants seem to be extremely satisfied.

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