Treasuries May Be Good Place to Tie Up Your Savings for a While

Psst! Here’s a secret: There are thousands of Americans out there who would like to buy Treasury bills, bonds and notes but don’t know how, or are simply afraid to ask.

This column is for you. It offers the basics of investing in Treasuries, which is something everyone should know, because these investments are safe, free of state taxes and competitively priced.

Once you start buying Treasuries, you will find they are a good place to put money that can be tied up for a while. Moreover, recent changes in the Treasury’s own sales program makes it even easier to buy and sell these securities.

Here is what you need to know. Treasury bills are short-term securities sold in 13-, 26- and 52-week maturities. Today, a 26-week Treasury is yielding 5.12%, an amount that corresponds to a taxable rate of 5.5% if you have a combined state and local tax rate of 7%. You need a minimum of $10,000 to buy a T-bill.

Treasury notes mature in two, three, five and 10 years. You can buy the shorter-term notes in $5,000 minimums, and just $1,000 will buy a five- or 10-year note. Today’s five-year note yields 5.93%, or 6.4% in after-tax dollars in that 7% state.

Treasury’s long bond, which has a 30-year maturity, can be bought in amounts as low as $1,000 and currently yields 6.34%, or 6.81% on an after-tax basis.

So how do you buy them? Directly from the Bureau of the Public Debt through its Treasury Direct program. When you buy directly from the Treasury, there are no commissions. You don’t get actual securities, but rather a regular statement that reflects your holdings.

The first time you buy from the Treasury, an account will be set up in your name. You will either send a check to pay for your Treasuries or authorize direct drafts from a bank account. After that, you can buy and sell your bills, notes and bonds from that account.

Thanks to new procedures, you can authorize the Treasury to take funds directly out of your bank account to buy new securities, order new investments by phone--for example, if you want to keep rolling over T-bills--and sell your securities back to the Treasury if you decide not to wait for them to mature.

How do you set up the initial account? By filing very simple forms to the servicing center (typically a Federal Reserve Bank) nearest you. The forms are available from the servicing center, by downloading them from the Treasury’s Web site at https://www.publicdebt.treas.gov, or by calling the Bureau of the Public Debt in Washington at (202) 874-4000. (A bureau spokesman said a toll-free number is in the works.)

How do you find the Federal Reserve Bank nearest you? Look in the white pages of your telephone book, ask a local banker, check the bureau’s Web page and search by ZIP Code or call the Washington-area number and search by ZIP Code.

That’s all there is to it. Now look at what your “safe” savings are earning at the bank, decide whether you can tie them up for a while, and think about being one of those “in the know” people who have transcended Treasury forms and become bill, note and bondholders.