How to Buy U.S. Treasury Bonds

(November 2024)

In This Article

Introduction

Buying U.S. Treasury bonds can be a great way to provide stability and security to your investment portfolio. A Treasury bill is a short-term US government debt obligation, issued at a discount from the par value. It can provide you with low-risk, 20- to 30-year investment options with higher yields.

There are two primary ways you can buy U.S. Treasury bonds: they can be purchased directly from the U.S. government and mutual funds through a broker. In this article, we’ll be providing the steps involved in buying U.S. Treasury bonds in any of the ways you choose.

Before we get into the steps, is buying U.S. Treasury bonds worth the investment? Yes, Treasury bonds offer a safer investment option compared to traditional corporate or municipal bonds, as they are backed by the full faith and credit of the U.S. government, reducing the risk of default or non-payment.

You can also get high yields, with rates as high as 3.875%, making them a more attractive option for money growth. However, note that U.S. Treasury bonds are taxed at the ordinary federal income tax level, which could be as high as 35%, compared to other investment options that are taxed at the capital gains tax rate. Therefore, you must consider your income level and tax rates when investing in Treasury bonds.

1. Directly from the U.S. through the Treasury Department.

Treasury bonds can be purchased from the government through TreasuryDirect.gov, with a minimum investment of $100. TreasuryDirect is an online platform operated by the U.S. Department of the Treasury, allowing you to buy, hold, and redeem Treasury securities. Eligible securities include Treasury bills, notes, bonds, floating rate notes, and TIPS. To purchase directly, you must follow specific steps and rules:

  • Gather the following information: As an investor looking to buy U.S. Treasury bonds directly from the government, you must gather your social security number or taxpayer identification number (TIN), an address within the United States, and a checking or savings account to link for payment. 
  • Visit the TreasuryDirect.gov website.
  • Create and choose the type of account you want: After visiting the site (treasurydirect.gov), you should create a free account by providing some personal information and banking details. You can select the account type you want: individual, business, estate, organization, or trust account. After creating an account, you should specify the amount you’d like to invest, with bonds available in increments of $100. It is important to ensure sensitive information is shared with the government.
  • Provide your gathered information: Provide details such as your TIN, U.S. address, and bank account details.
  • Create a username and password on your TreasuryDirect account.
  • Get verified to establish your TreasuryDirect account.
  • Select bonds: Choose the Treasury bond you want to purchase from the available offerings. You can filter options based on maturity, coupon rate, and issuance date.
  • Place an order: Specify the quantity of bonds you want to purchase and the desired amount you’re willing to pay.
  • Buy: To link your account to TreasuryDirect, provide your banking information. You can make payments using electronic funds transfers (EFTs) by clicking on “buy.”
  • Review and confirm: You’ll be directed to a page where you’ll review the details of your purchase. Make sure you carefully check for their accuracy.
  • Submit the order: Once you’re done with the review, you may be asked to accept terms and conditions, after which you’ll click to submit your order.
  • Settlement: The bonds will typically settle within a few business days of trading.

The benefits of buying directly through the TreasuryDirect website include convenience, lower costs, and high security by eliminating broking fees. Also easy access at any time, day or night.

2. Through a broker

A broking account enables trading of securities, including U.S. Treasury bonds, with a broker providing assistance in your investment decisions and trade execution.

Here are some steps to purchase through a broker:

  • Open a broking account: You can open an account with a broker online or in person. To open one, choose a reputable broking firm and open an account. You’ll need to provide personal information and financial details.
  • Research and choose a bond: When researching Treasury bonds, you should consider factors such as maturity, coupon rate, and price when purchasing them. Your broker can help you select the Treasury bond that best meets your investment goals and risk tolerance.
  • Place an order: You can place an order for Treasury bonds through your broker’s online platform or by contacting the broker directly. To place an order, submit a buy order to your broker, specifying the bond, quantity, and price you’re willing to pay.
  • Watch your settlement: After placing your order, the bond typically settles within a few business days of the trade.
  • Keep track of your investment: Your broker will provide regular updates on the performance of your Treasury bond and any market fluctuations.

There are benefits to buying your U.S. Treasury bonds through brokers; they offer you expert advice on purchasing Treasury bonds. Also, you get access to a wider range of securities, and convenience by managing investments through a single broking account, ensuring a comprehensive investment strategy.

It is important to note that there are some expenses you’ll incur using a broker, such as broking fees. Also, some broking firms have minimum account balances required to open an account. You should evaluate the research tools offered by broking firms when choosing one, as they can impact your overall returns and account balances.

Recap

Buying U.S. Treasury bonds can be done directly from the U.S. Treasury Department through a TreasuryDirect account or a broker. Both options offer lower costs, convenience, and security.

To buy Treasury bonds, open a TreasuryDirect account and purchase online. Alternatively, open a broker account, choose a bond, place an order, and monitor your investment.

Key considerations to buying U.S. Treasury bonds include understanding bond basics, determining investment goals, diversifying your portfolio, and staying informed about market conditions and interest rate trends. Additional resources can be found on TreasuryDirect and the U.S. Treasury Department. By following these steps, you can effectively purchase U.S. Treasury bonds to suit your financial needs.

Related Articles

Become a

S'witty Kiwi Credit Insider!

Get the latest credit tips and hacks in your inbox!