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Do I Still Need TreasuryDirect?

Last year, I wrote that paltry yields had made buying U.S. Treasury securities — most of which earn less than the best-paying CDs — unattractive for me.

I said I missed investing through TreasuryDirect.

I also said I wasn’t comfortable using online brokers for Treasury purchases.

I’ve changed my mind, however, and have even questioned whether — regardless of interest rate levels — I need TreasuryDirect at all.

You see, my new online brokerage accounts at Fidelity and Vanguard permit me to do all the T-Bill and T-Note investing I can do on TreasuryDirect — and much more — at little or no cost.

On TreasuryDirect, I can buy Treasuries at regularly scheduled auctions, without charge.

But I can do the same thing at Fidelity and Vanguard.

By trading online, I don’t pay commissions, and I can buy at the same price as everyone else, including TreasuryDirect customers, without any markup or “spread.”

Fidelity and Vanguard also permit the purchase of Treasuries in the secondary market, something unavailable on TreasuryDirect.

I can place an online order any trading day, and, again, there’s no commission (although there may be a markup).

Further, I can acquire Treasuries for an IRA, which TreasuryDirect doesn’t permit.

Finally, although I’m a “hold-to-maturity” type, my brokerage accounts enable me to sell Treasuries if need be.

TreasuryDirect used to have a feature called “SellDirect,” which permitted holders to sell securities through the system for $45 a transaction.

Unfortunately, it’s been discontinued, so now you need a brokerage account to sell.

Recently, I decided to unload a 3-year T-Note I had at TreasuryDirect to take advantage of a CD offering.

Because I couldn’t sell through TreasuryDirect, I had to transfer it (using cumbersome hard-copy paperwork requiring a signature guarantee and snail mail) to Fidelity first.

It took 12 days to get my money.

Had the Note been in my Fidelity account originally, I could have sold immediately and received the proceeds the next day — without commission.

But there remains a downside to using brokers.

Because they’re intermediaries, they can lose (or misuse) my Treasuries (let’s not forget MF Global!). There’s Securities Investor Protection Corporation insurance, but only for $500,000 of securities losses.

TreasuryDirect could lose my Treasuries, too, but it would be the government’s responsibility, and it would (presumably) be good for the loss.

So, I’m keeping my TreasuryDirect account for now, although, if I start investing in Treasuries again, I’ll do much of my buying at Fidelity, Vanguard and other online brokers.

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