How to Buy Treasury Bonds Online Using TreasuryDirect

posted on 08-19-2019

by Tony Daltorio

TreasuryDirect is the first and only financial services website that lets investors buy and redeem savings bonds, treasury bonds, and other U.S. government bonds directly from the U.S. Department of the Treasury in paperless electronic form.

Adding to the convenience, holders of paper savings bonds can also easily convert these phsyical bonds into electronic bonds through their TreasuryDirect account. That's right, you can turn your dusty savings bonds that you inherited from a loved one into digital convenience through your computer (isn't technology great?)!

TreasuryDirect accounts can be funded by either direct deposits from a bank account or it can be funded with payroll deductions through your employer. Additionally, investors may transfer treasury securities both in and out of their TreasuryDirect account.

So now that we've talked about how flexible TreasuryDirect can be, let's move on to the next big step...

How to Open a TreasuryDirect Account

Before transacting any business through TreasuryDirect, investors must apply for an account through the online application portal. The process is simple and can be completed in several minutes.

Investors must have the following in order to open an account: a valid social security number, a U.S. address of record, a checking or savings account at a U.S. financial institution that will accept debits and credits using the ACH payment method, and a valid email address.

Once the application is filled out, you will have established a personal account with the U.S. Treasury. An account number will be sent to you via e-mail and an access card will be sent to you through the U.S. mail within two weeks. The access card is required to complete transactions on TreasuryDirect.

Treasury Bills vs Bonds: Which Should You Buy?

Once your account is set up and ready-to-go, you can purchase any type of Treasury security. Here is a list of securities currently available:

  • Treasury bills are short-term government securities with maturities ranging from a few days to a year. Bills are sold at a discount from their face value.

  • Treasury notes are government securities that are issued with maturities of 2, 3, 5, 7, and 10 years and pay interest every six months.

  • Treasury bonds are government bonds that mature in either 20 or 30 years and pay interest every six months.

  • TIPS (Treasury Inflation-Protected Securities) are government securities whose principal is adjusted by changes in the Consumer Price Index (CPI). TIPS are issued with maturities of 5, 10, 20, and 30 years and pay interest every six months.

  • I Savings Bonds are sold at face value and are a low-risk product that earns interest while protecting investors from inflation.

  • EE/E Savings Bonds pay interest at a fixed rate for periods up to 30 years. Electronic bonds are sold at face value while paper bonds are sold at half of face value.

How to Buy Treasury Bonds Via TreasuryDirect

Once logging into TreasuryDirect, you can click directly to PurchaseExpress, the online buy order entry system to buy any Treasury security. You'll be prompted to select the owner of the security, as many investors buy Treasuries for gifts. You'll also select the product type and term, the amount of the purchase and the source of funds. You can schedule the date for whenever you like, subject to availability. The system will let you review the order before submitting it.

TreasuryDirect account holders can participate in all Treasury auctions of securities. These auctions are held approximately 200 times per year. Bids can be placed either on a non-competitive or a competitive basis. Non-competitive bids assure the investor will get the full purchase amount at the yield determined at the auction by the competitive bidding.

Orders entered are subject to minimums. For savings bonds, the minimum purchase requirement is $25 per person per year, all the way up to $5,000. For other Treasury securities, an investor may submit bids from $100 up to $5 million for each security type in $100 increments.

Once the order is executed, the positions will show up in your account. Savings bonds usually are issued to your account within one business day. Other Treasury securities are issued to your account within one week of the auction date.

How to Redeem Savings Bonds and Treasury Bonds Online

A TreasuryDirect account also allows investors to easily re-invest the proceeds from matured Treasury bills, notes, and bonds. Investors only need to select the "schedule repeat purchases" option and then choose the number of repeat purchases and their frequency.

Treasuries can also be sold through the ManageDirect interface. Treasury bills, notes, bonds, and TIPS are eligible for sell orders in $100 increments. Investors simply select the securities they wish to sell, the amounts, and payment destinations.

TreasuryDirect forwards your sell instructions to the Chicago Fed, which solicits bids from dealers. Your securities will be sold to the highest bidder. Unlike buy orders where there is no charge, your account will be assessed a $45 fee for most sales transactions.

To redeem a savings bond, an investor simply clicks the "redeem" button found near the bottom of the "current holdings" page. The investor will need to specify whether it is a partial or full redemption and furnish the payment destination.

Although there are some limitations and occasional fees with TreasuryDirect, it's an affordable service that makes buying government bonds easy. And with the service being online, it's hard to think of a faster way to cash in those dusty savings bonds you've been holding on to.

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