Understanding Treasury Securities: A Practical Guide To Purchasing Treasuries

With interest rates reaching levels unseen since the pre-2008 financial crisis, U.S. government debt has become increasingly attractive to investors seeking stable returns. The surge reflects a broader shift in market sentiment—according to data from the Securities Industry and Financial Markets Association, outstanding Treasury securities reached $8.0 trillion as of mid-2023, representing a significant year-over-year increase of 12.3%. For those looking to diversify their portfolio with low-risk assets, understanding how to buy treasuries is essential before committing your capital.

Why Invest In U.S. Treasuries Right Now?

The current economic landscape has fundamentally changed investor priorities. Treasury securities offer what few other investments can match: direct backing by the U.S. government’s full faith and credit. This guarantee means the government has never defaulted on obligations, making treasuries one of the safest wealth preservation tools available. Unlike corporate or municipal bonds, where issuer financial health directly affects your risk exposure, treasuries eliminate credit risk entirely.

The yield advantage over traditional savings vehicles is substantial. As of mid-2023, savings accounts offered an average annual percentage yield of just 0.42%, while certificates of deposit with 12-month terms yielded approximately 1.6%. By contrast, treasury securities delivered rates approaching 3.875%, providing investors with accelerated growth potential compared to standard banking products.

Comparing Treasury Products: Bonds, Bills, And Notes Explained

When researching how to buy treasuries, you’ll encounter three distinct product types, each serving different investment timeframes and strategies.

Treasury Bonds represent the longest-term commitment. These securities span 20 or 30 years to maturity, during which they pay a fixed interest rate every six months. The rate remains constant regardless of market fluctuations or economic changes, offering predictable income throughout the investment period.

For investors with shorter time horizons, Treasury Bills—commonly abbreviated as T-Bills—provide rapid liquidity. These instruments mature in four, 8, 13, 17, 26, or 52 weeks. Rather than paying interest directly, T-Bills are purchased at a discount to face value, with the difference between purchase price and full redemption value representing your return.

Treasury Notes occupy the middle ground between the extremes. Maturing anywhere from two to 10 years out, these securities combine the shorter timeframe of T-Bills with the intermediate holding periods that many investors prefer. Like bonds, they distribute fixed interest payments semiannually until maturity.

The Investment Case: Benefits And Considerations

Purchasing treasuries involves weighing multiple factors beyond simple yield comparisons. The advantages are compelling: capital safety through government backing, tax advantages on state and local levels (though federal taxes still apply), and superior returns versus savings accounts. The federal tax treatment applies your ordinary income tax rate to interest earnings, which can reach 35%, but this compares favorably to capital gains taxation if you’re seeking primarily income rather than appreciation.

However, meaningful drawbacks deserve serious consideration. Interest rate risk creates a fundamental challenge—when market rates rise above your treasury’s fixed rate, its secondary market value declines. A bond paying 3% becomes less attractive if new issues pay 4%, potentially locking in losses if you must liquidate before maturity. Inflation erosion represents another concern; as prices rise, your fixed interest payments buy less purchasing power, effectively reducing real returns. For long-term investors, this opportunity cost becomes significant when compared to the stock market’s historical average annual returns of approximately 10% (or roughly 6-7% when adjusted for inflation).

Step-By-Step: How To Buy Treasuries Today

Purchasing treasuries follows one of two primary pathways, each with distinct advantages and mechanics.

Direct Government Purchase: Visit TreasuryDirect.gov to buy treasuries directly from the U.S. Department of the Treasury. The process begins with account creation, requiring your Social Security number or taxpayer ID. You’ll provide personal information and banking details, then establish login credentials. The platform’s interface may appear dated compared to modern financial apps, but this reflects its secure, government-operated nature. Important: always verify you’re using the “.gov” domain to protect sensitive information. Minimum investments start at just $100, with additional purchases in $100 increments, making this accessible to most investors.

Broker-Based Purchasing: Alternatively, acquire treasury exposure through exchange-traded funds (ETFs) and mutual funds that hold government bonds. This method requires opening a brokerage account with an initial deposit, then accessing the trading platform to select and purchase your desired fund shares. This approach offers instant diversification across multiple securities rather than concentrating in individual treasuries.

Making Your Treasury Investment Decision

Treasury securities can meaningfully enhance a diversified portfolio, particularly for investors prioritizing capital preservation and stable income streams. However, they work best as portfolio components rather than focal points. Long-term investors targeting retirement should view treasuries as complementary to equity holdings, not replacement investments. The combination of bonds’ stability and stocks’ growth potential creates a more robust strategy than either alone.

Before finalizing treasury investments, assess your specific circumstances: tax situation, time horizon, and overall financial goals. Consulting a financial advisor helps ensure treasuries align with your complete investment plan rather than operating in isolation.