Treasury Bills, Bonds Just Got Easier to Buy
Individual investors will find it far easier to buy Treasury bills, notes and bonds directly from the government this fall, thanks to two initiatives announced Wednesday that will cut requisite minimum investments and allow individuals to buy Treasuries over the phone or the Internet.
Starting with next Monday’s auction, all Treasury securities will be offered in $1,000 increments. In the past, the minimum denomination of short-term Treasury bills--those with maturities of one year or less--was $10,000, while the minimum for two-year notes was $5,000.
In addition, the government’s Treasury Direct service, which allows investors to buy Treasury securities without going through a broker, will be expanded. Starting in mid-September, investors who already have Treasury Direct accounts will be able to buy Treasury securities over the Internet by filling out a form on the Treasury Department’s Web site at https://www.publicdebt.treas.gov. In October, investors will also be able to buy Treasuries via touch-tone phone.
“Our goal is to make Treasury securities more accessible to more Americans,” said Gary Gensler, assistant Treasury secretary for financial markets.
Added Treasury spokesman Pete Hollenbach: “We talk a lot about how people should save more. This just makes it easier.”
How will the Internet and phone-based programs work? When do they go live? How does Treasury Direct work now? Here are some answers to basic questions:
Q: What is Treasury Direct?
A: It is a service that allows you to buy Treasuries directly from the government during the Treasury’s regularly scheduled auctions. That allows you to avoid brokerage commissions and buy securities at the average selling price on the date of issue.
Q: How do I start an account?
A: To start an account, all you have to do is fill out an application, which includes your name, address, Social Security number and information about the bank account you want debited when you purchase Treasury securities in the future. These applications (government form #PD F 5182) are available at all local Federal Reserve banks and branches, as well as on the Treasury’s Web page.
If you want to buy a bill, note or bond at the same time as you open your account, you would send a certified check, along with your application. However, once you have an account set up, you’ll no longer need to send a check. The Treasury can simply debit your bank account.
Q: When does Internet-based service start, and how will it work?
A: Investors who have already established accounts will be able to purchase securities over the Internet starting Sept. 16. They’ll do this by going to the Treasury’s “virtual lobby,” where you click on the type of security that you wish to purchase. You’ll then respond to a number of prompts that seek your Treasury Direct account number and your Social Security number. Your bank account will be debited on the day of the auction to purchase the Treasuries you ordered. Those Treasuries will be deposited into your Treasury Direct account. You also check the balance of your account via the Internet.
Q: How does the Treasury propose to keep these financial transactions secure from computer hackers?
A: The Treasury’s service will be encrypted through a system called Secure Sockets Layer, which is designed to prevent eavesdropping, tampering or message forgery.
Q: Does the government charge any fees for its Treasury Direct service?
A: If your account is worth more than $100,000, there is a $25 annual account maintenance fee. If your account is worth less than that amount, there are no fees to purchase or maintain your account. However, there is a $34 fee imposed when you sell.
Q: When is the phone-based service going to launch, and how will that work?
A: It is scheduled to launch in late October, but there is not a set date yet. When it does launch, customers who have established Treasury accounts can call (800) 943-6834 from a touch-tone phone and follow the instructions.
The service will operate from 8 a.m. to 8 p.m. Eastern Time, Monday through Friday, with the exception of federal holidays. Like the Internet-based service, the cost of the Treasuries you order will be deducted from your bank account on the date of auction.
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What They Pay
Current annualized yields on the most commonly auctioned U.S. Treasury securities:
Term: Annualized yield
3-month: 5.09%
6-month: 5.21%
1-year: 5.30%
2-year: 5.41%
5-year: 5.43%
10-year: 5.44%
30-year: 5.67%
Source: Reuters
