Friday, March 23, 2007

First Purchase from

I've read about treasury bills in passing for a long time, and finally had a reason to try out the site & the system: my timeline for a home purchase recently shortened, so I needed a secure, short-term holding place for my $. [Enter]

On Tuesday, I bid for my first T-bill straight from the federal government, and the auction finally being settled last night, I'm now the proud owner of my first 4-week T-bill!

Sold in denominations of $1000, T-bills are exempt from both state and local tax (unfortunately, federal taxes still apply). When you bid for a T-bill, you're purchasing "at a discount from par," i.e. you pay $996 for the T-bill, and are paid the full $1000 when it matures. You can bid for a T-bill one of two ways:

  • Non-competitively
    Meaning you purchase the T-bill at the % set by the Treasury, a guaranteed purchase; or

  • Competitively
    Meaning that you state the interest rate you want, and, after all non-competitive bids are satisfied, the Treasury goes down the list of competitive bids starting with the lowest % offered - you may or may not be selected to participate.

T-bills with 4-week terms are auctioned every Tuesday, and 13- and 26-week (3-month and 6-month) T-bills are auctioned on Mondays. The account set-up process was immediate and painless, and for successful purchases, $ is taken withdrawn from your linked bank account on the day of settlement, which is two days after the auction. I plan to buy another in 2 weeks, but I'm waiting expectantly to see how expeditiously the Treasury pays out matured T-bills...keep you posted!

Update (3/2007): I've been remiss about my PFblog-reading lately; turns out TSFD has a nifty T-bill guide. Two cheers for Google Reader!

Update #2 (4/2007): My first 4-week T-bill matured yesterday. (Thursdays, always Thursdays!) I'm happy to report that the $ was deposited into my account right away, in time for next Tuesday's auction. Must learn to automate!


Sun said...

Thanks for the mention! Your article actually makes up what I missed in mine: I didn't talk about bid and I didn't talk about taxes, :)).

Golbguru said...

Awesome.I am planning to get into this stuff sometime next week. Were there any *rookie pitfalls* in the process?

WH said...

Sun, My beginner's take is nothing compared to your the screenshots!

Golbguru, The process is pretty simple. No caveats thus far, but I'll update as the ladder grows. I'm also looking into muni bonds...what about you?