How to Buy Treasury Debt at E*Trade
E*Trade offers more than funny commercials. Inside our test account, we found great bond search tools, and these can be used to locate Treasury securities. Here’s what you need to do to get started:
Step 1: Study Bond Basics
Adequate education is of paramount importance in the world of investing. After all, you are dealing with money here, and usually quite a bit of it. E*Trade understands this, which is why it has a good learning center on its website. You can locate it by going to Research > Education in the top row of choices.
We found several articles and one video on bond topics. These include such issues as bond ratings, interest rates and inflation, bond ladders, and bond swapping. While there are no articles on Treasuries specifically, the educational resources will nevertheless give you a good idea of what you’re investing in. They could also be a good refresher for investors who need to brush up.
Step 2: Head Over to E*Trade’s Bond Center
Clicking on Trading > Bonds will generate a page with lots of helpful information. For example, at the top of the page is a link to bond news and analysis. This section displays news articles on bond topics. One we found during our research was “U.S. Government Bonds Pull Back After Strong Data.” Obviously, these types of articles are good resources if you’re interested in trading Treasury debt.
After you’ve read the latest in bond news, it’s time to get down to business. There’s a yield grid underneath the news link. Besides corporate and municipal debt, Treasuries are shown. The different yields correspond to different maturities, and thankfully the yields are hyperlinked.
Clicking on a yield generates a new page. This will be a list of bonds that meet the yield and maturity criteria. The quantity of bonds available and the minimum order amount are both shown. Also in the results are coupon, maturity, current price, and credit rating.
If you don’t like the table format, E*Trade also offers a button that will produce a graph mode with maturity on the bottom and yield to worst on the vertical axis. Clicking on one of the bonds shown in the graph or one of the titles in the table format generates a pop-up window with more information.
Step 3: Choose a Treasury Security
The more detailed individual results will assist in you picking the right bond for your investment needs. Vital data we found during our research include coupon frequency, convexity, bid and ask figures, settlement date, and more.
There’s also a handy calculator in this window. With this tool, you’ll be able to estimate the total cost of a potential order. You just need to input a few variables, such as yield and quantity, and the calculator will do the rest.
Step 4: Placing a Bond Trade
When you’ve found the bond you want, it’s time to make a purchase. The best way to do this on E*Trade’s site is to simply click on the ‘Buy’ button that is in the far-right column in the bond search results. Doing this generates a new page with the broker’s fixed-income trade ticket. Most bits of information are filled out for you. The one field you need to add is the quantity field. There are no order types (it’s a fill-or-kill market order). The same calculator mentioned in the previous section is also available on the trade ticket.
E*Trade charges no commission for Treasury orders, but does impose a markup/markdown on them.
Consider Investing in Treasury Funds
On the ‘News & Analysis’ page mentioned earlier, we found a list of bond funds. These are good options if you would rather skip the research for individual bonds and invest in portfolios of them. A link to “All-Star Bond Mutual Funds” is displayed under “Tools.” Clicking on the link produces a page of bond funds pre-selected by E*Trade investment analysts. The funds are expected to outperform their peers. Some of the funds are non-Treasuries, but it’s easy to look through them and find Treasury funds. For example, we found ACITX, The American Century Inflation Adjusted Bond Fund. It invests in U.S. Treasury bonds and carries no transaction fee and no load at E*Trade.
Better Alternatives
For bond investing we recommend a broker called Ally Invest: see
Ally Invest Buying Treasuries.
For a completely commission-free investing the best option is
Firstrade (read review).
Continue Reading