Buying us Treasury Securities via the Treasury Direct Website

Treasury Direct is the U.S. Government administered website that allows individuals and organizations to purchase bonds directly from the Government at any time. Purchasing bonds through Treasury Direct is a relatively simple process, but does require a little familiarity with the site and its bond products. This article will walk you through the process so it is more familiar to you when you decide to purchase bonds through Treasury Direct. Essentially, the process of buying bonds through Treasury Direct is as follows.

• View Treasury Directs Guided Tour before buying
• Choose a bond type
• Open an account with Treasury Direct
• Purchase the bonds

1. Treasury Directs Guided Tour:

The guided tour at Treasury Direct is a good way to acclimate with the process of purchasing bonds through the website. The tour demonstrates what is needed to open an account such as accounts, and tax payer identification number. The guided tour also illustrates the steps required for opening an account from start to finish.

After an account is created at the site it can take two weeks or longer to receive the Treasury Direct access card needed at the site. Special forms can be used to gain faster access to purchasing at the site. The guided tour allows prospective bond buyers to review the bond buying process without actually having to register for an account so you can have a better idea of whether or not the process appeals to you.

2. Choosing bond type(s):

Series EE and I bonds are different For example, do you want tax deferred income, inflation protection, State and local tax free bonds, or a specific yield? There are many bonds sold by Treasury Direct, a list of which can be found at the treasury direct website. Among the choices of bonds are series EE Savings Bonds, and series I Savings Bonds. All these bonds have different features that are ideally studied carefully so as to match your objectives for the bonds. The specific features of each of these bonds are linked to below:

• EE Savings Bonds: $5000 maximum annual individual purchase, fixed rate interest.

• I Savings Bonds: $5000 maximum annual individual purchase, variable rate interest

3. Purchasing the bonds:

Both U.S. Treasury EE and I Bonds are bought in dollar amounts, at face value, and can also be purchased as gifts using Treasury Directs special Gift Box feature. After opening an account online Treasury Directs tool features may also be helpful in financial planning calculations.

Treasury Direct Electronic Bonds can only be purchased by individuals with ‘non-competitive bids’. What this means is the best price an individual can get on a bond is that established through the auction. Bids can placed online through the Treasury Direct site after an account is established.

Qualified organizations seeking to make ‘competitive bids’ on bonds can do so through a Treasury Automated Auction Processing System (TAAPS) account at Treasury Direct. Trust accounts and businesses can also buy savings bonds through opening and funding a Treasury Direct entity account. Bonds being purchased by organizations can also be purchased through ‘Treasury Retail Securities Sites’.

Funding of Treasury Direct Accounts is achieved by electronic transfer from a checking or savings account with a routing number. For bids at specific bond prices, a broker or bank must make the bid(s) for you. For more information on the auction process reading the Treasury Direct ‘Auctions In Depth’ page may be helpful to you.

Bond prices can fluctuate over time as do yields, so thinking carefully about the purchase is a good idea. For example, yields on I Bonds between May-October 2009 will be 0% according to the a Treasury Direct Press Release. Auctions and reopened bond sales occur on a monthly basis throughout the year.

Bond pricing for non-new issued bonds is based on specific calculations that balance yield, time to maturity, and face value. Examples of this calculation can be viewed on the Treasury Direct Bond pricing page. The pricing is determined through Treasury Direct Auction. For account holders who have bonds that are maturing and want to reinvest, a redemption account within the Treasury Direct Account is used; this is called a Certificate of Indebtedness and is also used for bond redemptions.

In summary, purchasing bonds directly through Treasury Direct bypasses the middlemen i.e. brokers and banks. To buy either EE or I Savings Bonds from Treasury Direct open an account, fund it through a checking or savings account, and purchase via auction. The details of these three steps have been reviewed in this article and through linked to information at the Treasury Direct website.