How to Buy Treasury Bonds and Bills

There are several ways to buy Treasuries. For many people, TreasuryDirect is a good option; however, retirement savers and investors who already have brokerage accounts are often better off buying bonds on the secondary market or with exchange-traded funds (ETFs). Treasury money market accounts also offer more convenience and liquidity than TreasuryDirect.

TreasuryDirect

TreasuryDirect is an electronic marketplace and online account system where investors can buy, hold, and redeem eligible book-entry Treasury securities. The TreasuryDirect system is run by the U.S. Department of the Treasury.

Individual investors with TreasuryDirect accounts can participate in Treasury debt auctions and purchase debt securities including U.S. savings bonds directly from the U.S. Treasury. Opening an account takes about 10 minutes. TreasuryDirect offers a simple and relatively inexpensive way to buy government debt securities.

Investors must have a valid Social Security number (or taxpayer identification number) and a U.S. address. They also need an email address, a web browser that supports 128-bit encryption, and a checking or savings account.

Bear in mind that you can't redeem Treasuries purchased on TreasuryDirect before maturity. If you decide that you need or want to sell them, you must transfer your securities to a broker and then sell them on the secondary market through that broker.

How to Purchase Treasuries on TreasuryDirect

Eligible securities for TreasuryDirect purchases include Treasury bills, Treasury notes, Treasury bonds, Floating Rate Notes (FRNs), and Treasury Inflation-Protected Securities (TIPS). Buying is simple. Once you log on, you can access the BuyDirect system. You'll be prompted to select the owner of the security.

Many investors buy Treasuries for gifts and charitable transfers. You'll also choose the product type or term, source of funds, and the amount to purchase. You can schedule the purchase whenever you like and how often you like, although dates are subject to availability. The system will allow you to review your order before submitting it.

Securities are generally issued to your account within two business days of the purchase date for savings bonds or within one week of the auction date for bills, notes, bonds, FRNs, and TIPS.

Transfers into TreasuryDirect are permissible and start at the outgoing firm. That is unlike the ACAT transfer process for broker-to-broker transfers, which is initiated at the receiving firm.

Once T-bills have matured, their proceeds are easy to reinvest. Simply select the "schedule repeat purchases" option and then choose the number of repeat purchases and their frequency after you have finished entering the registration and purchase information for your transaction. Maturing notes and bonds may also be reinvested.

Your account is subject to several restrictions. The minimum purchase amount for savings bonds is $25 per person. Above that, savings bonds are sold in penny increments up to $10,000 per year. For T-bills, notes, bonds, and TIPS, an investor may submit noncompetitive bids from $100 up to $10 million for each security type in $100 increments.

How to Participate in Treasury Auctions

TreasuryDirect account holders can participate in Treasury auctions held on a regular schedule throughout the year. In 2022, there were 384 public auctions for $15 trillion in Treasury debt securities.

The first step in the auction process is the announcement of upcoming auctions, generally four to five business days before the auction date. The announcement discloses the date of the auction, the amount of a security to be auctioned, its issue and maturity dates, terms and conditions, eligible participants, and deadlines for competitive and noncompetitive bids.

Noncompetitive bids guarantee the bidder will receive the desired amount of the auctioned security at a price set by competitive bidders in the auction. Noncompetitive bids are limited to $10 million. Competitive bids specify the expected discount rate, yield, or spread for a security and may only be filled in part, or not at all. Most individual investors make noncompetitive bids, while competitive bids typically come from financial institutions.

The second step of the auction process is the auction itself. On the auction date, the Treasury reviews all bids received for compliance with applicable rules. Compliant noncompetitive bids must be received by the close time stated in the auction announcement.

The final step of the auction process is the issuance of the securities. Securities are deposited to investor accounts, and payment is delivered to the Treasury.

Transferring Treasuries Through TreasuryDirect

Treasuries can be held until they mature or sold before that time. To sell Treasuries held in your account at TreasuryDirect, first, you must transfer them to an account you have with a bank, broker, or dealer, and then place an order to sell them.

A Transfer Request Form must be completed online or on paper to transfer Treasuries out of your TreasuryDirect account. This form should indicate the correct routing number, bank name, and any special handling instructions for your transfer.

To redeem a savings bond electronically, click the "Redeem" button found near the bottom of the "Current Holdings" page. You will need to specify whether it is a partial or full redemption and furnish the payment destination where you want the redemption proceeds deposited.

The redeem button will not appear on the holdings page if there are no bonds eligible for online redemption in your account. You can redeem paper bonds at most local financial institutions, such as your bank. That is the easiest and quickest way to get access to your money.

Other Ways to Buy Treasuries

Some of the other ways to buy Treasuries include ETFs, money market accounts, and the secondary market.

Buying Treasuries as ETFs

It is possible to buy Treasuries through ETFs at most brokerages. ETFs are bought and sold like stocks, and many qualify for commission-free trades. Investors can choose from government bond ETFs focused on short-term Treasuries, long-term Treasuries, TIPS, and FRNs.

Treasury ETFs can be held in IRAs and other tax-advantaged retirement accounts.

Buying Treasury Bills Through the Money Market

You can also buy Treasury bills by investing in a Treasury money market mutual fund. Such funds typically have low fees and low yields limited by rates on the shortest-term Treasury bills.

The U.S. Treasury's Office of Financial Research tracks the investments of U.S. money market mutual funds in the aggregate and by financial institution.

Buying Treasuries in the Secondary Market

Buying Treasuries in the secondary market is easier than most people think. Many brokerages give their customers full access to the bond market, but fees vary. If buying and selling Treasuries is important to you, many of the best brokerages offer free trading for Treasury bonds.

Even better, you completely avoid the annual fees of ETFs and the money market. Buying standard U.S. government bonds is easier than buying most other bonds because all you need to know is the time to maturity. TIPS can be trickier to trade.

When you buy bonds on the secondary market through a broker, you can hold them in an IRA or another tax-free retirement account. Buying on the secondary market also makes it easier to sell Treasury bonds at a later date.

We recommend the best products through an independent review process, and advertisers do not influence our picks. We may receive compensation if you visit partners we recommend. Read our advertiser disclosure for more info.

The Bottom Line

Treasuries are a great way to diversify your investment portfolio and reduce its risk since U.S. Treasuries are backed by the full faith and credit of the U.S. government. Treasuries are an important part of a retirement portfolio for many savers because they are liquid, low-risk, and provide an income stream.