2022: Can I buy bonds on Robinhood? Corporate, municipal bonds, U.S. bills, notes trading. How to buy T-Bills at auction?

Can I Buy Bonds on Robinhood?

Unfortunately, Robinhood does not offer investing in bonds (U.S. Treasury, corporate, or municipal bonds). Its main $0-commission competitor, TD Ameritrade, does provide this service. Learn about TD Ameritrade Bonds Investing.

Open TD Ameritrade Account


Open TD Ameritrade Account

How do Treasuries Work?

Although S&P downgraded the U.S. credit rating, the U.S. government is still the most reliable borrower in the world. That’s why U.S. treasuries are such a great investment. “U.S. treasuries” simply refers to U.S. Treasury bonds, which are also known as T-bonds. Treasuries might also be in the form of Treasury bills or Treasury notes. Investors look at the historical behavior of the United States Treasury in never defaulting on a debt as an incentive to invest in Treasury securities. Treasury bills, notes, and bonds are basically IOUs that the federal government issues in exchange for your money. When you buy Treasury securities, you are, in effect, loaning the government your money for a particular period of time. At the end of that time period, your securities will mature, and you will collect the face value of the security. In the interim, you will collect interest from your treasuries, with the exception being Treasury bills, which do not pay interest. The first use of treasuries occurred in World War I, when the U.S. issued Treasury bills to help balance out a high public debt. Treasury bills evolved to become the most popular type of short-term government-issued securities by the end of World War II.


Differences in Treasuries

There are some distinct differences in the three types of treasuries. One of those differences is in the maturities of the treasuries. Treasury bills, also known as T-bills, mature at either 91, 182, or 364 days, and are auctioned off every fourth Thursday. The interest rate for Treasury bills is determined by what bidders at auction are willing to pay, and can differ from auction to auction. T-bills do not pay out interest. Instead, they can be purchased at discounted prices. Treasury bills are the only securities offered by the Treasury that sell at discount. For instance, a Treasury bill that is worth $10K might be sold at a five percent discount for $9500. When that T-bill matures, the U.S. government will pay the holder of the bill the full price – in this instance, $10K. That is a $500 return on the initial investment.

Treasury notes, on the other hand, mature in two, three, five or ten years. Two year notes are auctioned monthly, while three year notes are only issued four times a year, and ten year notes are issued six times each year. Treasury notes pay interest twice yearly, and expire at what is called “par value”. Treasury bonds are issued in ten to thirty year maturities, and pay interest out twice per annum.


Tax Advantage of Treasury Bonds

One main draw for investors when it comes to Treasury bonds is that the interest income that they generate for investors is not taxable locally or on the state level. Nonetheless, interest from treasuries is taxable on your federal income tax return.


Buying Treasuries Direct

Any investor can buy U.S. treasuries direct – thus eliminating the middle man or the brokerage house from the deal, thanks to a special program that the government has initiated known as Treasury Direct. This program allows investors to set up their own account to purchase treasuries at auction, just like brokers do. In purchasing direct, investors bypass the brokerage fees or other transaction costs. The minimum investment is $1K for bonds, $5K for notes, and $10K for bills in order to participate in the program. The security’s par value and interest is paid to your account via the program, which is a convenience for investors.

As you can see, investing in treasuries can be quite rewarding. For those investors who cannot tolerate risk, treasuries may be the perfect option for growing wealth or building retirement income.


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