Subject: Bonds - Treasury Direct

Last-Revised: 2 Oct 2001
Contributed-By: Art Kamlet (artkamlet at aol.com), Bob Johnson, Rich Carreiro (rlcarr at animato.arlington.ma.us)

Treasury securities can be purchased directly from the US Treasury using a service named "TreasuryDirect." The minimum purchase for any Treasury security that can be obtained via the TreasuryDirect program is $1,000. There are no fees for accounts below $100,000; accounts in excess of that sum are charged a $25 annual fee. Interest payments can be made directly to an individual's TreasuryDirect account. Further, mature Treasury securities can be used to purchase new ones. Investors can do business with the TreasuryDirect program via the web, phone, or plain old mail.

The "Direct To You" services offered by the US Treasury have made transactions in the TreasuryDirect program very attractive for private investors. First, the Treasury can debit a bank account for the amount of the purchase after the instrument's price is set by the auction (the "Pay Direct" service). This means that an investor pays exactly the right amount, unlike the old system in which an investor was forced to send in a check for the full face value and wait for a refund. Second, investors can sell instruments before their maturity dates using the "Sell Direct" service. The Treasury charges $34 for brokering the sale of a Treasury instrument, which reportedly is less than the fee charged by banks and brokerage houses. The instrument is sold using the Federal Reserve Bank of Chicago, which is responsible for getting a fair price. Third, holders of Treasury instruments can reinvest funds from maturing instruments simply by using the telephone or the web along with the information that appears on a notice sent to holders of maturing instruments (the "Reinvest Direct" service).

Investors can get more information about the TreasuryDirect program either by calling 800-722-2678 or visiting the web site:
http://www.treasurydirect.gov

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