Securities purchased through TreasuryDirect cannot be sold in the secondary market before they mature. This lack of liquidity could be a disadvantage for investors who may need to access their investment capital before the securities' maturity.
Cons: Rates are variable, there's a lockup period and early withdrawal penalty, and there's a limit to how much you can invest. Only taxable accounts are allowed to invest in I bonds (i.e., no IRAs or 401(k) plans).
For many people, TreasuryDirect is a good option; however, retirement savers and investors who already have brokerage accounts are often better off buying bonds on the secondary market or with exchange-traded funds (ETFs). Treasury money market accounts also offer more convenience and liquidity than TreasuryDirect.
Cons: Interest Rate Risk: Long-term treasuries are more sensitive to changes in interest rates than short-term ones. If interest rates rise, the value of existing long-term bonds may decline, leading to potential capital losses.
TreasuryDirect.gov is the one and only place to buy and redeem U.S. savings bonds and other securities directly from the U.S. Treasury! Your investments are backed by the full faith and credit of the United States government.
TreasuryDirect is a web application from the U.S. Department of the Treasury. TreasuryDirect is free. There are no fees, no matter how much or how little you invest. You may hold both savings bonds and Treasury marketable securities in TreasuryDirect.
Treasury securities are considered a safe and secure investment option because the full faith and credit of the U.S. government guarantees that interest and principal payments will be paid on time.
While interest rates and inflation can affect Treasury bill rates, they're generally considered a lower-risk (but lower-reward) investment than other debt securities. Treasury bills are backed by the full faith and credit of the U.S. government. If held to maturity, T-bills are considered virtually risk-free.
The risk with buying a Treasury bond of longer duration is that interest rates will increase during the bond's life, and your bond will be worth less on the market than new bonds being issued.
Unlike a default, a shutdown does not affect the government's ability to pay its obligations, and, as noted, many critical services continue.
T-Bill Redemptions and Interest Earned
T-bills are issued at a discount from the par value (also known as the face value) of the bill, meaning the purchase price is less than the face value of the bill. So, for example, a $1,000 bill might cost the investor $950.
We sell Treasury Bills (Bills) for terms ranging from four weeks to 52 weeks. Bills are sold at a discount or at par (face value). When the bill matures, you are paid its face value. You can hold a bill until it matures or sell it before it matures.
If you're looking for a safe place to park your cash, you may want to consider T-bills or other government securities. Since your return will be lower than the return of riskier fixed-income and equity investments, using TreasuryDirect is smart, since it cuts out the middleman — and eliminates any commissions and fees.
You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.
There is a lack of flexibility because you will be locked-in for 1 year. You cannot withdraw for the next 12 months and even if you do withdraw after 12 months (but before 5 years), you will forfeit 3 months worth of interest.
I Bonds are a virtually risk-free investment, which makes them very popular in times of market uncertainty such as right now and as inflation devalues your cash. That said, there is a $10,000 limit each year for purchasing them.
T-Bill Tax Considerations
The interest income that you may receive from investing in a treasury bill is exempt from any state or local income taxes, regardless of the state where you file your taxes. However, you will need to report interest income from these investments on your federal tax return.
This means that some bonds are riskier investments than CDs. However, it should be noted that Treasury bonds are backed by the same federal government that funds the FDIC (Federal Deposit Insurance Corporation). For this reason, federal bonds and CDs carry virtually the same (very low) level of risk.
When your T-bill matures, its life is over. The US government will pay you the full face value of the bond. In our example above, you'd simply see the bond disappear out of your brokerage account or IRA and be replaced with $1,000.
3 Month Treasury Bill Rate is at 5.24%, compared to 5.23% the previous market day and 4.64% last year. This is higher than the long term average of 4.19%. The 3 Month Treasury Bill Rate is the yield received for investing in a government issued treasury security that has a maturity of 3 months.
Interest from corporate bonds and U.S. Treasury bonds interest is typically taxable at the federal level. U.S. Treasuries are exempt from state and local income taxes. Most interest income earned on municipal bonds is exempt from federal income taxes.
You can cash in electronic bonds online with TreasuryDirect, which will send the cash from the bond to your savings or checking account within two business days.
Low risk: Treasury bills are backed by the full faith and credit of the government, making them a very low-risk investment option. They also have a very short maturity date, so investors are not exposed to long-term market risks and are able to access their funds after brief periods.