Since my research involves Treasury auctions, I recently signed up for Treasury Direct and bought $100 worth of 13-week bill. Ideally, I would have prefer to participate in the competitive bidding of the auction – which is a multi-unit sealed-bid second-price auction requiring participants to submit a schedule of bids (quantity and prices). But since it would be difficult to carry that out, I instead participate through the Treasury Direct system. The Treasury Direct is an electronic system set up by the Treasury Department to allow individuals to purchase Treasury securities – making me part of the group that makes up the noncompetitive bidders. Noncompetitive bidders are those bidders that bids for a quantity. They are guaranteed to win the quantity they asked, in exchange for promising to pay the price determined by the competitive auction.
My main conclusion is that there are virtually zero reasons for individuals to buy Treasury bills. My $100 worth of 13-week bill yields an interest of zero.
The Treasury Department takes user security seriously. Before a recent change, you are mailed a code card to use for logging into the website. However, the system now is more in line with other financial institutions – only requiring clicking in your password to make keyboard capturing difficult, and setting up a personalized message and phrase to alleviate phishing. Here is the password login page:
What I did not know before using Treasury security is the existence of Treasury securities named Payroll C of I and Zero-Percent C of I. The next figure is the Treasury’s explanation of what they are. My best guess for their raison d’être is to facilitate the purchase of securities – since transferring money between the Treasury and the checking account can take a day or two. For this benefit, the user is essentially providing a loan to the US Government. Given that C of I are not “money,” these are essentially 0% very-short-term securities.
The next figure provides detail on the Treasury bill I purchased. Notice that I pay $100 for the securities, and after 3 months, I got back $100. The auction result for my security is here. Since the price of the securities is actually $99.994944, I should get an interest of $0.005056. Since I get back only $100, I can only assume either the Treasury does not round up, or it follows the rounding rule where 0.50 – because the digit following ‘5’ is ‘0’– is rounded down.
Finally, here are the options available to a user of Treasury Direct who is interested in purchasing Treasury securities:
If you select to purchase Treasury bills, you will see a list of securities to purchase, as well as a list of parameters relating to the purchase:
