How to Buy Treasury Bills as Some Yields Reach 5%

bond investing

With yields on some Treasury bills now reaching 5%, these assets have become increasingly attractive to investors. However, there are important aspects of the purchasing process that investors should be aware of, according to experts.

Treasury bills, also known as T-bills, are short-term debt securities backed by the U.S. government that are nearly risk-free. These securities have maturities ranging from four to 52 weeks and pay interest at maturity, which is exempt from state and local taxes.

As a result of the Federal Reserve’s series of rate hikes, T-bills have emerged as a competitive option for cash investments, with some T-bills offering yields in excess of 5% as of February 24th.

According to Jeremy Keil, a certified financial planner at Keil Financial Partners in Milwaukee, it’s not possible to directly compare the rates of Treasury bills with other financial products, as T-bills are typically sold at a discount, with their full value paid at maturity.

To illustrate this point, consider a scenario where an investor purchases $1,000 of one-year T-bills at a 4% discount, resulting in a purchase price of $960. To calculate the coupon rate of the T-bill (which is 4.16%), the investor would subtract the purchase price of $960 from the $1,000 maturity value and then divide the difference by $960.

TICKER Duration YIELD(%) CHANGE
US1M
U.S. 1 Month Treasury 4.622 0.031
US3M
U.S. 3 Month Treasury 4.833 0.001
US6M
U.S. 6 Month Treasury 5.11 0.019
US1Y
U.S. 1 Year Treasury 5.046 0.017
US2Y
U.S. 2 Year Treasury 4.814 0.121
US10Y
U.S. 10 Year Treasury 3.947 0.066
US30Y
U.S. 30 Year Treasury 3.93 0.052

Jeremy Keil, a certified financial planner at Keil Financial Partners, advises that investors can access the “true yield” or “bank equivalent yield” of Treasury bills when purchasing them through TreasuryDirect, a website managed by the U.S. Department of the Treasury, or their brokerage account.

How to buy Treasury bills from TreasuryDirect?

If you’re interested in buying Treasury bills, here are the steps you can follow:

  1. Open a TreasuryDirect account: TreasuryDirect is the online portal of the U.S. Department of the Treasury where you can buy and manage your Treasury securities. You can visit the website at www.treasurydirect.gov to open an account.
  2. Fund your account: You can fund your TreasuryDirect account by linking it to your bank account and transferring funds electronically. You can also buy Treasury bills using your tax refund or by setting up a payroll savings plan.
  3. Decide on the type of Treasury bill you want to buy: Treasury bills are short-term securities with maturities ranging from a few days to a year. You can choose to buy bills with maturities of 4, 13, 26, or 52 weeks, depending on your investment goals.
  4. Place your order: Once you’ve decided on the type of bill you want to buy, you can place your order through the TreasuryDirect website. You’ll need to specify the amount you want to invest and the maturity date of the bill.
  5. Wait for the auction: Treasury bills are sold through an auction process, so you’ll need to wait for the auction to take place before you can buy your bill. The auction is usually held on Mondays, Tuesdays, or Wednesdays, and you’ll be notified of the results by email.
  6. Settle your purchase: Once you’ve successfully bought your Treasury bill, you’ll need to settle the purchase by transferring funds from your TreasuryDirect account to pay for the bill. You can then hold the bill until it matures or sell it on the secondary market if you need to liquidate your investment.

Buy T-bills through brokerage accounts for more liquidity

How to Buy Treasury Bills as Some Yields Reach 5%

To avoid potential liquidity issues, one strategy is to purchase Treasury bills through a brokerage account rather than using TreasuryDirect, according to Jeremy Keil, a certified financial planner at Keil Financial Partners. Keil notes that the primary benefit of using a brokerage account is immediate access to T-bills and knowledge of the yield to maturity, although this convenience may come at the expense of a slightly lower yield of around 0.1% or less.

George Gagliardi, a CFP and founder of Coromandel Wealth Management in Lexington, Massachusetts, also recommends buying T-bills outside of TreasuryDirect to avoid liquidity issues. He suggests that investors consider low-fee exchange-traded funds, which are available through brokerage accounts and enable investors to buy and sell T-bills before maturity.

While fees associated with exchange-traded funds may slightly reduce the interest earned on T-bills, Gagliardi notes that the convenience of purchasing and selling before maturity may outweigh this modest reduction in yield for many investors.

Several brokers to Consider

Brokerage accounts allow investors to buy and sell a variety of securities, including T-bills. Brokerage firms typically offer access to a range of government securities, including Treasury bills, through their online platforms. Investors can purchase T-bills directly from the government or through a brokerage account.

One advantage of buying Treasury bills through a brokerage account is that it can provide access to a larger pool of liquidity. Brokerage firms have access to a large network of buyers and sellers, which can make it easier to buy and sell T-bills quickly and at competitive prices.

Additionally, brokerage accounts can provide investors with access to research and analysis on T-bills, as well as other investment options. This information can help investors make informed decisions about buying and selling T-bills, and can help them identify investment opportunities that meet their financial goals and risk tolerance.

There are several brokerage firms that offer the ability to buy Treasury bills. Here are a few options to consider:

  1. Fidelity: Fidelity is a full-service brokerage firm that offers access to a range of government securities, including Treasury bills. Fidelity provides research and analysis on T-bills, as well as other investment options, and allows investors to buy T-bills online through their platform.
  2. TD Ameritrade: TD Ameritrade is another full-service brokerage firm that offers access to Treasury bills. TD Ameritrade provides investors with access to research and analysis on T-bills, as well as other investment options, and allows investors to buy T-bills online through their platform.
  3. Charles Schwab: Charles Schwab is a full-service brokerage firm that offers access to a range of government securities, including Treasury bills. Charles Schwab provides research and analysis on T-bills, as well as other investment options, and allows investors to buy T-bills online through their platform.
  4. E-Trade: E-Trade is an online brokerage firm that offers access to a range of government securities, including Treasury bills. E-Trade provides investors with access to research and analysis on T-bills, as well as other investment options, and allows investors to buy T-bills online through their platform.
  5. Interactive Brokers: Interactive Brokers is a brokerage firm that provides access to a range of government securities, including Treasury bills. Interactive Brokers provides research and analysis on T-bills, as well as other investment options, and allows investors to buy T-bills online through their platform.

Conclusion

In conclusion, Treasury bills can be an attractive option for investors seeking a low-risk, short-term investment. With some T-bills now offering yields of over 5%, they may be a compelling alternative to other cash investments. However, investors should be aware of the nuances of purchasing T-bills, including the fact that they are typically sold at a discount and may have liquidity issues if bought through TreasuryDirect. By using a brokerage account and considering low-fee exchange-traded funds, investors can mitigate some of these challenges and enjoy the benefits of investing in Treasury bills. With careful consideration and a clear understanding of the process, T-bills can be a valuable addition to any investor’s portfolio.

Author:Com21.com,This article is an original creation by Com21.com. If you wish to repost or share, please include an attribution to the source and provide a link to the original article.Post Link:https://www.com21.com/how-to-buy-treasury-bills.html

Like (1)
Previous February 25, 2023 1:40 pm
Next February 26, 2023 1:38 am

Related Posts

  • A Beginner’s Guide to Options Trading: Exploring moomoo, Webull, and Robinhood Platforms

    Options trading is an exciting and potentially profitable way to get involved in the stock market. An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specific date. There are two types of options: call options, which give the holder the right to buy the asset, and put options, which give the holder the right to sell the asset. Today, we will discuss how to get started with options trading…

    12 hours ago
    0
  • An Introduction to Fidelity: Account Opening, Trading Platform Features, Funding Options, Fees, and Takeaways

    Introduction to Fidelity Fidelity is a leading brokerage firm in the United States, providing a wide range of financial services, including investment advice, retirement planning, wealth management, and more. The firm was founded in 1946 and has since grown into a global company, with offices in North America, Europe, Asia, and Australia. Fidelity offers a variety of investment options to its clients, including stocks, bonds, mutual funds, exchange-traded funds (ETFs), options, and more. The firm’s investment platform is user-friendly, making it easy for investors to research and trade securities. Fidelity…

    March 4, 2023
    0
  • Maximize Your Investment Potential with TradeUP: A Review of the Zero-Commission Stock Broker

    Introduction In today’s fast-paced and technology-driven world, commission-free online stock brokers have revolutionized the investment landscape, making it easier and more accessible for individuals to trade stocks and build their investment portfolios. One such platform that has quickly gained popularity is TradeUP (www.tradeup.com), known for its user-friendly interface and zero-commission trading options. In this review, we will delve into the features and benefits of TradeUP, helping you determine if this platform is the right choice for your investment needs. Background and Overview of TradeUP UP Fintech Holding Limited(NASDAQ:TIGR), d/b/a Tiger…

    March 23, 2023
    0
  • Mastering the Market with E-Trade: A Thorough Examination of the Renowned Stock Broker

    Are you looking to invest in the stock market? Have you heard about E-Trade and want to know more about this renowned broker? Look no further! In this blog post, we’ll take a thorough examination of E-Trade and teach you everything there is to know about mastering the market with this cutting-edge investment platform. Whether you’re a seasoned investor or just starting out, our guide will give you all the information needed to make informed decisions and reap substantial rewards. So buckle up, grab your notepad, and get ready for…

    March 16, 2023
    0
  • Stash Investing 101: Everything You Need To Know To Get Started With Stash And Make The Most Of Your Investment

    Investing can seem intimidating and complex, but Stash Investing makes it easy and straightforward. In this article, learn about the basics of Stash Investing and how to get started with the platform to make the most of your investment. Whether you’re a beginner or an experienced investor, this guide will provide all the information you need to understand Stash and make smart investments. Introduction to Stash Investing Stash is an investing app that allows users to start investing with as little as $5. It offers a variety of investment options,…

    February 13, 2023
    0
  • Robinhood Review: Is This Commission-Free Trading App Right for You?

    Are you looking to invest in the stock market but don’t know where to start? If so, you may have heard of Robinhood, the commission-free trading app that has revolutionized the way people buy and sell stocks. But is Robinhood really as good as it seems or are there downsides to using this app? In this blog post, we’ll take a deeper look at Robinhood and provide an honest review of its features and services. Whether you’re just starting out investing or you’re a seasoned investor, this review will help…

    February 18, 2023
    0
  • An In-Depth Review of Public.com: The Pros and Cons of this Investing Platform

    Introduction to Public.com Public.com is an investment app that aims to make investing in the stock market more accessible to everyone. Launched in 2019, the app allows investors to buy and sell individual stocks and ETFs with zero commission fees. One of the unique features of Public.com is its social investing platform, which allows users to share their investments and follow other investors. Users can see what stocks other users are buying and selling, as well as engage in discussions about market trends and investing strategies. Public.com is a social…

    February 18, 2023
    0
  • Ensuring the Safety of Your Investments: Understanding SIPC Protection and the Importance of Secure Stock Brokers

    In the world of investing, safeguarding your hard-earned money is of paramount importance. As an investor, you entrust your financial assets to stock brokers, expecting them to act in your best interests and protect your investments from potential risks. One crucial aspect to consider when selecting a stock broker is the security measures they have in place to protect your assets, including SIPC protection. In this article, we will delve into the importance of choosing a secure stock broker and discuss the role of the Securities Investor Protection Corporation (SIPC)…

    March 15, 2023
    0
  • moomoo March 2023: 17 Free Stocks + 1 Free AAPL + Access to ChatGPT Stocks

    Moomoo is here to help you achieve your investment goals. With our latest promotion, you can receive 17 free stocks when you deposit $1,000 for the first time. And if you’re looking to supercharge your portfolio, deposit $3,888 and receive an additional 1 FREE share of Apple stock (NASDAQ:AAPL). Join us and start your investing journey today! Introduction to moomoo Moomoo.com is a commission-free trading platform that allows users to invest in a wide range of financial instruments such as stocks, options, ETFs, and cryptocurrencies. MOOMOO platform was launched in…

    February 23, 2023
    0
  • Public.com Review: A Commission-Free Investing App with a Social Twist

    Public.com is a commission-free investing app that aims to make the stock market accessible to everyone. It was founded in 2019 by Leif Abraham and Jannick Malling with a mission to empower people to invest in the companies they believe in, and it has since gained a lot of popularity among investors. Investors can use Public.com to buy and sell stocks, exchange-traded funds (ETFs), and cryptocurrencies without paying any commission fees. The app is available for both iOS and Android devices and is very user-friendly, making it a great option…

    February 13, 2023
    0

Leave a Reply

Your email address will not be published. Required fields are marked *