What are Treasury securities?
Treasuries are issued through the U.S. Department of the Treasury and are backed by the full faith and credit of the U.S. government. Because of their high credit rating, Treasuries are often the benchmark against which other debt securities are measured.
What does Schwab offer?
- Broad selection and access to Treasuries
- Guidance from Fixed Income Specialists
- No markups on new issues or secondary trades
Why would Schwab recommend Treasuries?
Treasuries are considered one of the safest investments for protecting capital while also creating a predictable income stream. Additionally, Treasuries offer a wide range of maturity dates to choose from and are relatively easy to buy and sell, and interest payments are generally exempt from state and local income taxes.
What does Schwab charge to trade Treasury securities?
There are no markups or fees for online purchases. New issues purchased with the assistance of a Schwab broker are subject to a $25 broker-assisted fee.
Secondary market Treasuries
Online price + $25 per trade*
*Schwab uses the same pricing schedule for sell orders, which must be placed through a broker and are subject to a $25 broker-assisted fee.
Talk to a Fixed Income Specialist to learn more about Treasury pricing.
Types of Treasury securities.
Treasury bills (t-bills)
Treasury bills have maturities of one year or less. Treasury bills don’t have coupon rates, as they are generally issued at a discount but pay the full par value at maturity.
Treasury notes are intermediate-term to long-term bonds, typically issued with original maturities of 2, 3, 5, 7, or 10 years. As time passes, however, Treasury notes can be bought and sold in the secondary market with various maturities of less than 10 years.
Treasury bonds are originally issued with 30-year maturities. As time passes, Treasury bonds can be bought in the secondary market with maturities of under 30 years.
Treasury Inflation-Protected Securities (TIPS)
TIPS are Treasuries that are indexed to inflation. Like traditional Treasuries, TIPS are issued with par values of $1,000, but movements in the Consumer Price Index (CPI) adjust that par value. Interest is then paid semiannually on the adjusted value. At maturity, TIPS are redeemable at either face value or the inflation-adjusted principal, whichever is greater. TIPS are issued with initial maturities of 5, 10, or 30 years, although the time to maturity can vary for purchases on the secondary market.
Take a closer look at the benefits.
With Treasuries, payment of principal and interest is guaranteed by the full faith and credit of the U.S. government. If held to maturity, Treasuries are guaranteed to repay your original investment.
Most Treasuries pay a fixed interest rate on a regular schedule (usually semiannual), so investors know exactly what interest payment they will receive and when they will receive it.
Although federally taxable, the interest on Treasuries is exempt from both state and local taxes.
Range of maturities
Treasury securities are issued with a broad range of maturity dates, making it easy to find Treasuries that can help you meet your goals.
Treasuries are generally the most liquid types of fixed income investment. A large, active secondary market offers ample opportunities to sell your Treasuries before maturity.
Review the risks.
Treasury securities are subject to the following types of risk: interest rate, reinvestment, inflation (or purchasing power), market, and event, as well as other risks commonly associated with fixed income securities.
The value of a fixed income security could fall as a result of a change in interest rates.
If interest rates are low when a bond reaches its maturity date or the issuer calls the bond, the investor could be left with lower yielding reinvestment options and a possible reduction in cash flow.
Inflation (purchasing power)
If prices rise at a higher rate than investment returns, your money buys less in the future. The risk is greatest if the bond has a long time until maturity.
Market and event
Outside situations that influence the market could have a negative impact on the price or value of your investment.
Find and buy Treasury securities.
New-issue Treasuries are sold through an auction process by the U.S. Treasury on a regular basis. See the schedule below for date information.
Treasury auction schedule
The Federal Reserve regularly modifies auction dates. Below is a typical Treasury auction schedule.
|4-week t-bill||Every Tuesday|
|13- to 26-week t-bill||Every Monday|
|52-week t-bill||Usually late each month|
|2-year notes||Usually late each month|
|3-year notes||Usually first half of each month|
|5-year notes||Usually late each month|
|7-year notes||Usually late each month|
|10-year notes||Every month|
|30-year notes||Every month|
(All dates subject to change)
Take advantage of resources to help you make decisions.
Talk to a specialist
Get assistance from over 100 Schwab Fixed Income Specialists, who draw on an average of over 21 years of experience.2
Do the research
Access commentary that provides you with greater insight.
Attend a workshop
Learn more through educational workshops at your local Schwab branch.
We're here to help
Clients of independent investment advisors: You may also contact your advisor or call Schwab Alliance at 800-515-2157.
1. As of December 2015.
2. As of January 2016.
Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks, including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors.
Treasury Inflation-Protected Securities (TIPS) are inflation-linked securities issued by the U.S. government whose principal value is adjusted periodically in accordance with the rise and fall in the inflation rate. Thus, the dividend amount payable is also impacted by variations in the inflation rate, as it is based upon the principal value of the bond. It may fluctuate up or down. Repayment at maturity is guaranteed by the U.S. government and may be adjusted for inflation to become the greater of the original face amount at issuance or that face amount plus an adjustment for inflation.
Income may be subject to the alternative minimum tax (AMT), and capital appreciation from discounted bonds may be subject to state or local taxes. Capital gains are not exempt from federal income tax.
Schwab reserves the right to act as principal on any bond transaction. In secondary market principal transactions, the price will be subject to our standard markup in the case of purchases and markdown in the case of sales, and may also include a profit to Schwab in the form of a bid-ask spread. When trading as principal, Schwab may also be holding the security in its own account prior to selling it to you and, therefore, may make (or lose) money depending on whether the price of the security has risen or fallen while Schwab has held it.
This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.
The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.