bank rates

TreasuryDirect’s Great; Its Yields Are Not

I’d planned to buy a 5-year Treasury note recently using TreasuryDirect.

Just before the auction, however, I changed my mind and put my money into a 2-year bank CD instead.

U.S. Savings Bonds

Treasury yields are just too paltry.

When the financial crisis hit in 2008, I had virtually every penny I owned (outside of my IRA) invested in 6-month Treasury bills and 2-year notes.

Although escaping the stock market collapse unscathed, I found my maturing Treasuries quickly ensnared by the Fed’s Zero Interest Rate Policy and quantitative easing.

I was forced to take refuge in higher-yielding FDIC-insured CDs — at multiple banks — where I remain today.

Maybe it’s nostalgia, but I miss TreasuryDirect, despite its limitations.

TreasuryDirect simplified investing for me, allowing me to deal with only one institution — the U.S. government — which, after all, prints our money.

Also, while far from state-of-the-art, TreasuryDirect, unlike many bank online systems, always worked as advertised.

Once you get your TreasuryDirect account set up (no more complicated than a typical online bank account), you can manage your portfolio with a proverbial mouse click.

You can buy 1-, 3- and 6-month T-bills weekly, 12-month T-bills every 28 days and notes and bonds monthly. The minimum purchase is $1,000.

You can enter orders up to a few hours before an auction and even cancel at the last minute.

Principal and interest payments are automatically — and accurately — credited to either your TreasuryDirect account or bank account. Funds transfers are free and take one business day, not three or four.

And you do everything yourself. No customer service representatives, no supervisors, no e-mail or fax exchanges necessary.

The major downside to TreasuryDirect is the limited number of auctions. You can’t buy securities every day.

You also can’t sell your Treasuries through the system anymore. TreasuryDirect recently dropped its online sale feature, SellDirect, claiming few used it.

In other words, TreasuryDirect is for hold-to-maturity types.

For those comfortable hiring a middleman (I am not), online brokers offer far more flexibility for Treasury investment. And online banks offer a lot more services, as well as government-insured CDs, 24/7.

But, for simplicity and reliability, I’ll take TreasuryDirect any day.

Come on, Mr. Bernanke. Get your boot heel off interest rates and let me go back to TreasuryDirect.


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Comments (3)
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3 Existing Comments
  1. Serge Milman said:
    on January 29th at 12:43 pm

    Absolutely correct. Treasuries are not at all competitive with CDs issued by some FDIC insured Banks and NCUA insured Credit Unions. In fact, the yield gap is HUGE. A few examples

    1 yr Treasury yields just 0.24%, whereas some Banks & Credit Unions offer 1yr CDs yielding 2.00% — a difference of almost 10x.

    2 yr Treasury yields 0.54%, whereas some Banks and Credit Unions offer 2yr CDs yielding 2.27% — a difference of more than 4x.

    Choosing Banks and Credit Unions are your source for CD investments should be a “no-brainer”.

  2. SeniorSaver said:
    on February 4th at 05:02 pm

    I need to correct my own handiwork here. The reference to a $1,000 minimum purchase amount is erroneous. Thise amount was lowered to $100 in 2008, about the time I made my last Treasury piurchase. Sorry for the error.

  3. SeniorSaver said:
    on February 4th at 05:20 pm

    Let me restate my penultimate sentence: “This amount was lowered to $100 in 2008, about the time I made my last Treasury purchase.”
    (When you get as old as I am, sometimes you get it wrong–like clicking on the “Post” button before you’ve corrected typos.)