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Dr. Don Taylor, CFA, Bankrate.com advice columnistHow to buy a Treasury bill

Dear Dr. Don,
In the July 2 business section of the L.A. Times there was an article on a 5.23 percent yield on a six-month Treasury bill. How does one go about purchasing a Treasury bill?
-- James G.

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Dear James,
The Treasury auctions three Treasury bills every week: a 28-day T-bill, a 91-day T-bill and a 182-day T-bill. They are more commonly known as one-month, three-month and six-month bills. Any Treasury security with a final maturity of a year or less at issuance is called a bill.

The Treasury will also issue short-term cash management bills close to quarterly tax payment dates. The Treasury also issues notes that range in maturity from one to 10 years and a Treasury bond that has a final maturity of 30 years at issuance. The Treasury also issues five-year, 10-year and 20-year maturities of Treasury Inflation-Protected Securities, or TIPS.

You can buy Treasury securities from your stock broker, or you can buy them directly from the government by setting up a TreasuryDirect account. At this time TreasuryDirect doesn't allow you to establish an IRA or other tax-advantaged retirement account, just individual taxable accounts.

If you're buying through a brokerage firm it makes sense to discuss what commissions you'll pay when buying the securities. Paying $75 to buy a six-month T-bill with a $10,000 face value will bring that 5.23 percent yield down quite a bit.

Bankrate publishes the auction averages for the three- and six-month T-bills each week on its Treasury Rate Watch page. The bills are quoted as discount rates, and the bond-equivalent yields will be somewhat higher.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "financing a home," "saving & investing" or "money."

Bankrate.com's corrections policy -- Posted: July 27, 2006
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