https://www.financialsamurai.com/treasury-bonds/
With U.S. treasury bond yields zooming higher, the interest in buying treasury bonds has followed suit. Let me show you how to buy treasury bonds online.
Treasury bonds are risk-free investments if you hold them until maturity. Treasury bonds are issued by the United States federal government to finance projects or day-to-day operations. As inflation and inflation expectations rise and fall, so do treasury bond yields.
The first way to buy treasury bonds is through TreasuryDirect.gov. TreasuryDirect.gov enables you to buy treasury bonds directly from the government each time treasury bonds are issued. Hopefully, all of you already have a TreasuryDirect.gov account because all of you decided to buy I Bonds in 2021 and 2022.
The $10,000 worth of I Bonds we bought at the end of 2021 and another $10,000 we bought at the beginning of 2022 have been fantastic investments. Too bad individuals are limited to buying $10,000 a year. As a result, more people are looking to buy treasury bonds, where purchase amounts are unlimited.
Unfortunately, the TreasuryDirect.gov website is cumbersome. Don’t lose your password or the answers to your security questions. If you do and get locked out, it will take one hour or longer to get a hold of someone to reset your password. Further, you can only buy treasury bills (one year or less) or treasury bonds whenever the government decides to auction them off. And when the bills or bonds are available, you can’t easily see the yield!
Below is a snapshot of what I see when I log on and click BuyDirect and select Bonds. Notice how it is unclear what the yield is for each Product Term, despite the website asking you to input a Purchase Amount.
The second way to buy treasury bonds is through an online brokerage account like Fidelity, Charles Schwab, or E*Trade. You pay a nominal fee by receiving a lower bond yield (3-5 basis points). But it may be much easier for most investors.
Given I use the Fidelity platform, I’ll show you how to buy treasury bonds using this platform. However, all the online brokerage accounts are similar. Online brokerage accounts are marketplaces for buying and selling already issued treasury bonds.
Step 1: Once you’ve opened up an investment account on Fidelity, go to News & Research. Then click Fixed Income, Bonds & CDs in the dropdown menu.
Step 2: You will see a chart that shows all types of bonds based on duration. I’ve highlighted the U.S. Treasury row in a red box. In the image, the U.S. treasury yields range from 3.53% for a 3-month treasury bill to 3.8% on a 30-year treasury bond.
Once you’ve selected the type of bond and duration you would like to buy, click the yield link.
Step 3: You’ll now see various bonds on the Fidelity secondary market to choose from. Below is a list based on me clicking 4.23% for a 1-year treasury bond.
You mainly want to choose to buy the bond with the highest Yield. The Maturity Date will all be similar, but they can range by up to two months. Remember, you won’t be getting back the par value ($100/share) until that Maturity Date.
Why are there so many types to choose from? Again, online brokerage accounts are a marketplace for existing treasury bonds in this example. Further, not all the treasury bonds under a specific maturity date were issued at the same time. This is why you see different Coupon payments and bond prices.