Q. I'm concerned about the stock market and thinking of moving some of my money into Treasury securities. How do I go about buying them?
A. Bills and notes -- the securities the U.S. Treasury issues when the federal government borrows from the public -- can be purchased in several ways. The easiest and least expensive way to buy is via the government's electronic service, known as TreasuryDirect.
You can also buy them at banks and thrift institutions, brokerage offices and Federal Reserve banks. The private institutions generally charge a fee or commission.
TreasuryDirect, in operation since 1986, boasts more than a half million active accounts, said Treasury spokesman Peter Hollenbach.
You can go to the Web site www.treasurydirect.gov or call 800-722-2678 "and get all the information you need to get started," Hollenbach said.
Because demand for Treasuries is high, interest rates currently are very low. The rate on the six-month bills sold this week was 1.555 percent, the lowest on record.
Still, there are advantages to owning Treasuries: The principal and interest are fully guaranteed by the federal government. Proceeds are free from state and local tax. And the securities are "liquid," meaning they can be sold on the secondary market.
The bills and notes are sold at the roughly 150 auctions the Treasury holds each year. Big investors put in competitive bids for the securities, and small investors get their securities at the interest rate or yield set in the auction.
The minimum purchase is $1,000, and additional purchases must be in multiples of $1,000.
Treasury bills, or T-bills, that mature in three months or six months are available weekly. They're sold at a discount, meaning that you pay less than face value for them and get full value when they mature.
Two-year notes are auctioned monthly, while five- and 10-year notes are sold quarterly. Notes pay a fixed rate of interest every six months.
In addition, Treasury offers inflation-indexed 10-year notes in January, July and October. With these securities, the principal value is adjusted semiannually to reflect changes in the government's Consumer Price Index.
Hollenbach said consumers have two ways to begin:
* To make a one-time purchase, you can download a purchase order from TreasuryDirect or request one at the Treasury's toll-free number. Just fill it out and mail it with your payment. A cashier's check is required for bills, but a personal check will suffice for notes. Your order will be filled at the next auction.
* For more flexibility, you can open an account by filling out an application form and mailing it in. Once your TreasuryDirect account is open, you can buy with the click of a mouse or on the phone, automatically transferring money from a checking or savings account.
When a bill or note matures, TreasuryDirect has a procedure to let you reinvest the proceeds in an upcoming auction. And if you have to sell before a security matures, TreasuryDirect can handle that, too, though at a cost of $34 per issue.
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