There are several ways to buy Treasuries. For many people, TreasuryDirect is a good option. However, retirement savers and investors who already have brokerage accounts are often better off buying bonds on the secondary market or with exchange traded funds (ETFs). Treasury money market accounts also offer more convenience and liquidity than TreasuryDirect.

Key Takeaways

  • TreasuryDirect allows investors to buy Treasury bonds and bills directly from the U.S. government.
  • It is not possible to open IRAs or other tax-advantaged accounts at TreasuryDirect.
  • Investors must transfer bonds from TreasuryDirect to banks or brokerages if they want to sell the bonds before they reach maturity.
  • Some of the other ways to buy treasuries include ETFs, money market accounts, and the secondary market.
  • When you buy bonds on the secondary market through a broker, you can hold them in an IRA or another tax-free retirement account. You can also do this with ETFs.

TreasuryDirect

TreasuryDirect is an electronic marketplace and online account system where investors may hold and conduct transactions in eligible book-entry Treasury securities. The TreasuryDirect system is run by the Treasury Bureau of the Fiscal Service section of the U.S. Treasury Department, a branch of the federal government.

Investors can 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.

Before making any transactions through TreasuryDirect, investors must apply for an account through the online application portal. The process is simple and can be done fairly quickly.

It is not possible to open tax-advantaged retirement accounts at TreasuryDirect.

Investors must have a valid Social Security number (or taxpayer identification number) and a U.S. address. They also need an email address, a web browser that supports 128-bit encryption, and a checking or savings account.

How to Purchase Treasuries on TreasuryDirect

Eligible securities include Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation-Protected Securities (TIPS). Buying is simple. Once you log on, you can access the BuyDirect system. You'll be prompted to select the owner of the security.

Many investors buy Treasuries for gifts and charitable transfers. You'll also choose the product type or term, source of funds, and the amount to 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.

Securities are generally issued to your account within two business days of the purchase date for savings bonds or within one week of the auction date for bills, notes, bonds, FRNs, and TIPS.

Transfers into TreasuryDirect are permissible and start at the outgoing firm. That is unlike the ACAT transfer process for broker-to-broker transfers, which is initiated at the receiving firm.

Once T-bills have matured, their proceeds are easy to reinvest. 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 several restrictions. The minimum purchase amount for savings bonds is $25 per person. Above that, savings bonds are sold in penny increments up to $10,000 per year. For T-bills, notes, bonds, and TIPS, an investor may submit noncompetitive bids from $100 up to $5 million for each security type in $100 increments.

How to Participate in Treasury Auctions

TreasuryDirect account holders can also participate in Treasury auctions, which are regularly scheduled throughout the year; in 2020, there were 503 auctions.

The first step in the auction process is the announcement of upcoming auctions, which are generally declared 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.

The second step of the auction process is the auction date when the Treasury reviews all bids received to ensure compliance with the full set of applicable rules. All compliant noncompetitive bids are accepted up until issue day, as long as they are appropriately postmarked. The final step of the auction process is the issuance of the securities. Securities are deposited to accounts, and payment is delivered to the Treasury.

Transferring Treasuries Through TreasuryDirect

Treasuries can be held until they mature or sold before that time. To sell Treasuries held in TreasuryDirect, you should transfer them to a bank, broker, or dealer, then ask them to sell them for you.

A Transfer Request Form must be completed online or in paper form to transfer Treasuries out of your account. This form should indicate the correct routing number, bank name, and any special handling instructions for your transfer. After completing these steps, submit the form to TreasuryDirect.

To redeem a savings bond electronically, 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 want the redemption proceeds deposited.

The redeem button will not appear on the holdings page if there are no eligible bonds in your account. You can cash paper bonds at most local financial institutions, such as your bank. That is the easiest and quickest way to get access to your money.

Other Ways to Buy Treasuries

Some of the other ways to buy Treasuries include ETFs, money market accounts, and the secondary market.

Buying Treasuries as ETFs

It is possible to buy Treasuries as ETFs at most brokerages. ETFs can be bought and sold like stocks, and many of them are offered as commission-free trades. A variety of government bond ETFs are available, including short-term Treasuries, long-term Treasuries, and TIPS.

Most ETFs have modest annual fees, often below 1% per year, making them a very affordable investment option.

There are also ETFs for Treasury bills, such as the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL). Treasury ETFs can be held in IRAs and many other tax-free retirement accounts.

Buying Treasury Bills Through the Money Market

You can also buy Treasury bills by investing in a Treasury money market mutual fund. Once you invest in one of these funds, buying and selling T-bills becomes easy. However, there are several significant limitations. You should probably open an account at the brokerage offering the Treasury money market mutual fund that you want. Treasury money market funds also tend to have high minimum investment requirements or high fees.

Buying Treasuries in the Secondary Market

Buying Treasuries in the secondary market is easier than most people think. Many brokerages give their customers full access to the bond market, but fees vary. If buying and selling Treasuries is important to you, many of the best brokerages offer free trading for Treasury bonds.

Even better, you completely avoid the annual fees of ETFs and the money market. Buying standard U.S. government bonds is easier than buying most other bonds because all you need to know is the time to maturity. TIPS are much trickier to trade, mostly because of the way they handle inflation and deflation.

When you buy bonds on the secondary market through a broker, you can hold them in an IRA or another tax-free retirement account. Buying on the secondary market also makes it easier to sell Treasury bonds at a later date.

How Do You Buy and Sell Short Term Treasury Bills?

You can buy short-term Treasury bills on TreasuryDirect, the U.S. government's portal for buying U.S. Treasuries. Short-term Treasury bills can also be bought and sold at a bank or via a broker. If you do not hold your Treasuries till maturity, the only way to sell them is via a bank or broker.

How Many Treasury Bills Can You Buy?

The maximum amount of Treasury bills that you can buy in a single auction is $5 million if the bids are noncompeitive or 35% of the offering amount if the bids are competitive.

How Do You Buy T-Bills Online?

You can buy T-bills online directly from the U.S. government at TreasuryDirect. Alternatively, you can also buy T-bills at a bank or broker. Bills are issued weekly through an auction bidding process.

How Do You Buy Canadian Treasury Bills?

You can buy Canadian Treasury bills from a financial institution or from a broker. The minimum investment for purchasing a Canadian Treasury bill is $1,000.

The Bottom Line

Treasuries are a great way to diversify your investment portfolio and include low-risk investments as U.S. Treasuries are backed by the full faith and credit of the U.S. government. Treasuries are a great retirement option for older investors as they are liquid, low risk, and provide an income stream. Younger investors may want to opt for higher-returning investments, but Treasuries can be a good option as long as the return outpaces inflation.