Buying/Selling Treasury Bills and Bonds

July 16, 2023

For the portion of your portfolio that you want to keep in cash, Treasury Bills offer liquidity and a solid yield (as of 6/30/23).

You can buy treasuries either at the treasury’s auctions or on the secondary market. For treasury auctions, you can go directly to the treasury at or participate in the auctions through most brokers.

There are some advantages in buying directly from the Treasury. First, there are no fees. Most online brokers don’t charge fees, but some do. The more important advantage is in the mechanics of the auto roll over feature. Often, we like to buy 4 week T-Bills. We roll them over meaning when they mature, we re-invest the funds in another 4 week Bill. When you use the auto roll feature at Treasury Direct, there is no lag between when the bill matures and when your funds are reinvested in the next bill.

Schwab and Fidelity offer the auto rollover feature, but as of 6/30/23, there is a week lag between when your bill matures, and your money is reinvested in another bill. This means you do not get Treasury Rate Interest on your money during that week. If you buy 4 week T-Bills, this could translate into a significant loss of interest. One out of every 5 weeks, you’re out of the treasury market and in cash or whatever short term investment vehicle your broker offers.

There are some advantages to using a broker vs TreasuryDirect (TD).

1 – If you want to sell your Bill before maturity, with TD, you have to transfer the Bill to a broker, if it’s at the broker, you can sell immediately.

2 – With TD, you have to wait for an auction. 4 Week T-Bills are offered every week. Longer dated bills are not. You can buy Bills/Bonds that were previously auctioned with a broker, you can’t with TD.

The bid/ask spread for treasuries is different for each broker and you should check the width of the spread before you decide which broker you’re going to select to handle your fixed income business. Last we checked (5/31/23), the bid/ask spread on a $1M 6 month Treasury Bill was 97.654 / 97.674. This means if you bought $1M of that TBill and then you decided to sell it, you’d lose about $200 (assuming the market didn’t move). That’s a pretty tight spread. On a single name equity, the spread could be 3x or more as wide, meaning you’d lose $600 on the change of your mind.

One other advantage of holding your Treasury’s at Treasury Direct is that the Bills/Bonds are held in your name, not the name of the broker you used to buy them. This is similar to holding your equity securities at the transfer agent. When we have a significant percentage of our portfolio in Treasuries, we hold them at TD. Just a little extra security at minimal cost. Cost is the inconvenience of having to move them to a broker if we want to sell them prior to maturity.