TreasuryDirect: A place to find low-risk income while avoiding fees

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Buying through TreasuryDirect can help you avoid commissions and other fees charged by some brokers.

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TreasuryDirect is a U.S. Treasury Department website where you can buy Treasury securities directly from the government without paying commissions. TreasuryDirect is open to the general public, as well as entities such as trusts, estates, corporations, and state and local governments.

The securities available on TreasuryDirect include Treasury bills, notes, bonds, floating rate notes (FRNs), and Treasury inflation-protected securities (TIPS). It’s also the only place to buy and redeem electronic savings bonds, including Series EE savings bonds and inflation-linked Series I bonds.

When building an investment portfolio, you may want to focus a portion on delivering low-risk income. Treasury securities can play that role because they’re backed by the full faith and credit of the U.S. government and generally exempt from state and local income taxes. 

Most Treasury securities—such as bills, notes, bonds, TIPS, and floating rate notes—are sold at regularly scheduled auctions. When you buy through TreasuryDirect, you’re participating in those auctions by submitting a noncompetitive bid, which means you accept the yield determined at auction. (Many investors instead buy these securities later in the secondary market through a brokerage account.)

Savings bond rates are set differently. Series I bond rates are updated twice a year, in May and November, combining a fixed rate with an inflation component. Series EE bonds pay a fixed interest rate, and the Treasury guarantees they will at least double in value after 20 years if held to maturity.

Treasury bills are auctioned weekly, while notes, bonds, TIPS, and floating rate notes are auctioned monthly or quarterly, depending on the maturity.

You can open a TreasuryDirect account online in a few minutes, although additional identity verification may sometimes be required. The first step is to select which kind of account you’re opening; there are options for individuals, corporations, partnerships, trusts, or estates. Next, provide your tax ID number, email and mailing addresses, and bank account information. Finally, create a password and choose security questions.

Once your account is set up, you can buy securities directly. You can also set up automatic reinvestment programs on TreasuryDirect to maintain your exposure to Treasury securities after they reach maturity.

One important limitation: When you buy a Treasury security on TreasuryDirect, you must hold it in your account for at least 45 days before either selling or transferring it. That means some securities, such as four-week Treasury bills, must effectively be held until maturity. The 45-day holding period applies to new purchases as well as reinvestments, which may limit the liquidity of your portfolio as a whole.

If you invest through TreasuryDirect, the minimum investment is $100. For savings bonds, you can buy up to $10,000 in Series EE bonds and $10,000 in Series I bonds each calendar year.

You may also face limits when purchasing T-bills, T-notes, bonds, TIPS, or FRNs on TreasuryDirect. These limits are not annual, but per auction. When you buy securities through TreasuryDirect, the purchases are considered noncompetitive, because you don’t participate in the auction process. You can make a noncompetitive purchase of up to $10 million for each type of security, and each term of security, at each auction.

The $10 million limit applies per account or entity. However, if you choose to reinvest the proceeds from maturing Treasury securities using a TreasuryDirect account, those reinvestments don’t count toward your purchase limit.

TreasuryDirect is only one way to buy Treasury securities (with the exception of savings bonds, which can only be purchased directly from the Treasury). You can buy most Treasury securities on the secondary market, typically through a brokerage account. Many brokers offer commission-free trading for Treasurys, but transactions in the secondary market may involve a bid-ask spread or other transaction costs, which can reduce your overall return.

The $10 million per-auction limit may make the secondary market more appealing if you’re managing a large portfolio. And the 45-day holding period required by TreasuryDirect may make the secondary market appealing if you need ready liquidity from the fixed-income portion of your portfolio.

TreasuryDirect lets you buy Treasury securities directly from the government—without commissions—and hold them to maturity. But it comes with trade-offs, most notably limited liquidity and fewer tools for managing your portfolio.

Buying through a brokerage account offers more flexibility. Your Treasury securities sit alongside your stocks, funds, and other holdings, so you can see everything in one place, track your allocation, and trade when you need to. That convenience may come with costs, such as bid-ask spreads or other transaction charges.

The choice comes down to whether you prefer direct ownership with fewer moving parts, or easier access and visibility across your entire portfolio.