Buying Wholesale
How to Buy Treasuries Directly from the Government by
Deloitte & Touche OnLine
Updated Monday, January 27, 1997
Investors can save money by buying government securities directly
through the Federal Reserve, using the U.S. Treasury’s "Treasury Direct"
system.
Treasury bills, notes, and bonds are sold at more than 150 auctions
throughout the year. You can find out about upcoming Treasury auctions from the Federal
Register, from financial institutions or your broker, and from many newspapers. You can
also find out about them from the
Treasury Department’s web site or by calling recordings at your local service
office.
To use Treasury Direct, you must have an investor account with the
Treasury Department. If you don’t have an account, the Treasury will set one up for
you automatically the first time you try to buy securities from them.
If you decide to buy securities through Treasury Direct, you must submit
a sealed bid on a tender form (a request to purchase a security form) to one of the 36
Federal Reserve Banks or to the Bureau of Public Debt by a specified time the day of the
auction. You can order tender forms from your local Federal Reserve Bank branch or service
office.
You can submit either a competitive or a non-competitive bid. With a
noncompetitive bid, the purchaser accepts the price set at the auction. The difference
between the price one pays for the security at the auction and the final face value at
maturity is often called the discount amount. Basically, the discount is the interest the
investor earns on the security. Most individual investors submit noncompetitive bids.
With a competitive bid, the investor submits a bid with a proposed
discount rate, and if the discount rate falls within a range accepted at the auction, the
purchaser can buy the security at that rate. If the bid is rejected, the purchaser might
end up paying a higher price than the noncompetitive bidders pay.
You can submit a bid in person or by mail (it must be postmarked the day
before the auction). You can also bid electronically through a financial institution or a
broker or dealer.
Filling Out Your Tender Form
Your tender form must indicate the type of security that you wish to
buy. You must also indicate whether you are submitting a competitive or noncompetitive
bid.
If you want your securities to be added to an existing Treasury Direct
account, include your account number. If no account number is listed, Treasury will open a
new account.
Tender forms must also include a daytime telephone number, address, and
Social Security number.
You can pay for your securities by check, in cash, or with other
securities that mature on or before the issue date. Cash must be presented in person.
Personal checks must be certified and they must be made payable to the institution to
which they are submitted (that is, to the specific Federal Reserve Bank or branch or to
the Bureau of the Public Debt).
Be sure to include direct-deposit information since the Treasury
Department only makes payments now through direct deposit. You have to include the Routing
Number for your bank (or other financial institution), the name on the account, and the
account type and number.
You submit the tender to the Federal Reserve Bank or Branch serving your
local area. If you live in the Washington, D.C. area, you submit it to the Bureau of
Public Debt, Capital Servicing Center.
Treasury Direct will send you a statement of account confirming that
securities have been issued in your account. If you bought a note or bond, you may also
receive a discount payment or premium notice, representing the difference between the
amount you submitted and the actual cost of the security.
Minimum Purchase Prices and Auction Schedules
- T-bills: $10,000 minimum bid; 13- and 26-week bills are
auctioned weekly; 52-week bills are auctioned every four weeks.
- T-notes with maturities of less than 5 years: $5,000
minimum bid; 2- and 5-year notes are auctioned monthly.
- T-notes with maturities from 5 to 10 years: $1,000
minimum bid; 3- and 10-year notes are auctioned 4 times a year.
- T-bonds with maturities over 10 years: $1,000 minimum
bid; 10-year bonds are auctioned quarterly; 30-year bonds are auctioned twice a year.
|
