Treasury Direct is the online buying and redemption of securities and bonds directly through the US treasuries without having to go through the cumbersome process involved in local banks. One can buy a diverse range of federal Government securities such as Series 1 and Series EE savings bonds, Treasury bills, bonds, (Treasury Inflated Protection Securities) TIPS and notes.
Why does it matter?
The US Government sells the securities through a direct selling platform and uses the money to finance the federal debt.
This provides the investors to procure securities directly from its source without having to pay fees and commission charges to brokers and middlemen. This system helps both the people and the Government to invest in a highly effective, straightforward and cost effective manner.
How does it work?
The securities are sold through a bidding and auction process that determines its rate and yield according to the price of bid offered by various investors. Treasury Direct provides an ecological, environmentally friendly and paperless way of investing in funds and also offers its investors to easily manage their portfolios online.
Who can benefit from Treasury Direct?
Treasury Direct is a completely trustworthy US Government website that provides the feasibility of managing one’s financial accounts without the payment of any added brokerage charges. Furthermore, people who wish to invest for long term should only opt for Treasury Direct as selling bonds prior to maturity would not reap fruitful results and generate lower profits. Also, Treasury Direct offers only newly issued bonds and is not suitable for investors who are looking for trading options.
How to participate in the auction and buy securities
One can take part in the auction by opening up an account in the Treasury Direct website through a three step simple and convenient process. Investors have to fill in their personal details like bank account number and tax id number and create an account in just about ten minutes without any payment of fees. After the account has been created, one can buy the securities of their choice by choosing from a pool of available options like TIPS, bills, notes, bonds or FRN via an option called Buy Direct. For this, one has to participate in either a competitive or a non-competitive bid after an auction is announced by the treasury department. Non competent bidding is suitable for investors who are not very experienced in trading in securities as the US Treasury Direct promises to pay a fixed amount of security on the investment provided they follow the highest bidding cap. However, on the other hand, competitive bidding is suitable for institutional traders who are proficient in the trading industry and have more risk-taking capabilities. The yield and discount rate that they will receive is determined by comparing the bid placed by them to the numbers specified by the auction committee.
The prerequisites required to open an account in the Treasury Direct are the availability of a taxpayer id, Social Security number, citizenship of the USA and a bank account number to link it with the Treasury Direct. Members can track the status of their account and have an overview of the current holdings through the official website of Treasury Direct.