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Paper Treasuries as an Investment
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Paper Treasuries as an Investment

  #1 (permalink)
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Paper Treasuries as an Investment

Hi guys,

I wanted to know if any of you guys have experience buying US treasuries/bonds/etc but paper rather than futures.

So in my case I would like to buy the US 2yr note at x% yield determined at the auction. I know I can register at the treasury dept but had a few Qs:


1) Is it better to buy via competitive/noncompetitive bidding?

2) Is it worthwhile using a broker/bank or going direct?

3) What kind of brokers/banks do this? (I am located in the UK)

4) What issues might I face as an international investor?


I appreciate any info from anyone that's been through this process before. It may help me avoid seeking out a financial adviser for a fairly simple task.

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  #2 (permalink)
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Things I have discovered so far:


- You can use treasury direct as a non-US citizen but must have a valid social security number and a physical address where you can receive mail to open an account. I have neither so will not be able to take this route and will need to use a broker.

- Looking at brokers/banks I think the best options I have found so far that cater to UK clients are either TD Ameritrade or Charles Schwab. Both allow you to buy the actual bonds rather than an ETF or Fund which negates the point for me. In my case I do not care whether prices rise/fall as I will be holding to maturity, so I only care about yield. Others may require different end goals.

- Research indicates that the SIPC covers foreign nationals too, so funds will be secured which is good news. I will confirm this myself though by emailing them nearer the time.

- When buying foreign bonds you will need to account for the cost of hedging your FX exposure. Research thus far shows that the best way to hedge out CCY exposure is to trade 3m Forwards. The cost of these hedges may in fact negate the extra yield received on the foreign bond vs a domestic bond.


Last edited by CobblersAwls; February 4th, 2018 at 02:48 PM.
 
  #3 (permalink)
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I spoke to treasury direct and they informed me that you can indeed use treasury direct as a non-US citizen but must have a valid social security number and a physical address where you can receive mail to open an account. I have neither so will not be able to take this route and will need to use a broker.


Looking at brokers/banks I think the best options I have found so far that cater to UK clients are either TD Ameritrade or Charles Schwab. Both allow you to buy the actual bonds rather than an ETF or Fund which negates the point for me. In my case I do not care whether prices rise/fall as I will be holding to maturity, so I only care about yield.

Can anyone suggest any others or tell me about their experiences with each?

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