Hello and welcome to TreasuryDirect.
You might have heard more recently about Marketable Securities
and had some questions
about what they are, how they work, and how you can purchase them.
In this video, we will discuss those topics.
A Security is a loan that an investor makes to the U.S.
Treasury, which is then paid back, with interest, after a set amount of time.
We refer to this time frame as the Term.
This is the same whether you purchase a Marketable Security
or a Savings Security such as a Series I bond. With Marketable Securities
we refer to the face amount of the security as the Par amount.
Marketable Securities can be purchased below
Par Amount, which is called a Discount,
above Par Amount, referred to as a Premium or at Par Amount.
Marketable Securities are only available electronically,
either through TreasuryDirect or through a broker or dealer.
What makes a Marketable Security different
is how you purchase them and what happens once you purchase it.
To purchase a Marketable Security, you will participate in an auction.
The auction is when the interest rate or the amount below Par
the security will be sold for,
known as the Discount Margin, is set. Through TreasuryDirect
you are able to make Non-Competitive bids, where you state
how much you would like to purchase but agree to accept whatever
the interest rate or discount margin is set at. Through
a broker or dealer, you can make Competitive Bids
where you can state not only how much you want to purchase,
but what interest rate or discount margin
you are willing to accept.
Keep in mind, while TreasuryDirect will never charge
you any fees for our services, many brokers and dealers will.
Non-Competitive bids will
be guaranteed and the Securities will be issued
where Competitive Bids will only receive Securities
if the interest rate or discount margin are acceptable
to the terms of the bid. With Non-Competitive bids,
the purchase limit is $10 million per auction,
while Competitive Bids have a purchase limit based
on how much money in Securities is being offered.
Marketable Securities are not able to be redeemed prior to the end of their term,
which is known as the Maturity Date.
However, you can sell these Securities on a secondary marketplace
using the assistance of a broker or dealer.
Once a Marketable Security is purchased, it
begins earning interest until it reaches its maturity date,
when the Security is automatically redeemed for the Par or Face Amount.
When purchasing a Marketable Security,
you might have the option to set up reinvestments
where TreasuryDirect will automatically purchase a new Marketable
Security with the proceeds from the original purchase.
Not every Marketable Security is eligible for reinvestments, so make sure you watch
the videos on the different types of Marketable Securities.
More information can be found on the TreasuryDirect.gov website
under the Treasury Marketable Securities tab.
And that's it.
That is the basics of Marketable Securities.