Good ole Uncle Sam has made buying his bonds so much easier than it used to be and believe it or not it’s actually more efficient! In these days of infinite deficits he had to make borrowing money so easy a caveman could do it!
Now you can buy US treasury obligations directly from the government on the government website www.treasurydirect.gov.
This website totally replaces the US Treasury bond market brokers had a monopoly on twenty or thirty years ago. Brokers used to mark bonds up for resale to the public retail accounts and mark them down i.e. bid lower than the round lot price when buying from the retail sector. The mark up or mark down could be as much as $10 per $1,000 or one point. That differential in price materially effected yield to retail purchasers. Essentially that $10 was a commission the brokers charged.
The only thing you can’t do on treasury direct is affect the pricing of new issues. The big dealers who have billions of dollars to invest will still determine the pricing of new bonds through the auction process but if you put your order in for the new issue you will get the same price the ‘Big Boys’ get.
Establishing an account is about as easy as signing up for facebook.com or amazon.com except this site requires your social security number as well as your bank’s routing number and your account number. Just go to treasurydirect.gov and click on Set up an account. It’s that little light blue line in the left corner of the screen. Follow the instructions and submit your application. All applications must be approved and that might take some time up to two weeks before you get a card in the mail that will allow you to use the site. They don’t want terrorists using their site.
Once you are approved and have transferred the amount of money you wish to invest the possibilities of purchasing and selling government obligations are only limited by the financial resources at your disposal and your knowledge of the products available on the site.
You can both buy and sell on this site and that’s important for some investment strategies. The important thing is that it bypasses the banks and brokers who used to markup financial instruments when selling to retail customers and marking down their bids when buying from retail. The market here is very close to the bids and offers in the round lot market. Remember a round lot in bonds is One Million Dollars of principal face amount.
Every financial instrument issued by the government and many of those issued by state and local governments is completely and thoroughly explained on this site. Take the tour and look over the wide variety of possibilities.
You may have some old series E, EE or I bonds in that box in your closet. You know the ones your aunt gave you for your birthday or at Christmas. Pull them out and look them up. They may have matured.
On treasury direct most bonds are digitally posted to your account. Therefore they don’t exist in physical form but you can still buy EE bonds and the like for birthday or graduation presents for your own kids, nieces, nephews and grandkids and they will be delivered in certificate form.
The value of this site is so obvious and the use of it so simple that it hardly warrants a financial expert’s commentary. It’s there. It’s simple and you don’t need any explanation of how to use it from anyone.
There are two possibilities that you might consider that might not immediately come to mind. On this site you can do laddering and you can ride the yield curve.
Laddering treasuries is just like laddering CDs. There are treasury securities maturing just about every month for the next thirty years. So you can extend your CD ladder to any length by buying treasury securities beyond the five year maximum maturity of most CDs.
Riding the yield curve is a very old game that used to be open only to the really rich. It works like this. You look at the different yields to maturity of different maturity treasury obligations and you will see that there is a point along the yield curve where there is a disproportionate differential in yield for a short period along the curve. It might be a two month period out around the 7th year where you can pick up 20-30 basis points more yield for holding treasuries during that two month period than anywhere else along the curve. So that’s the buy point. In a day or two and not more than a week that little discrepancy will disappear as buyers come in to flatten out the curve. If you want to play the game it does take some real money to make it worth your time but it is possible and this site makes it easy.
If treasury bonds are an investment you might have an interest in you should visit www.treasurydirect.gov .