How to Participate in a Public Treasury Bond Auction

Treasury bonds are a safe, transferable form of investment which involves loaning money to the United States government. Although it is possible to buy Treasury bonds through a bank or broker, all Treasury securities are also available to the public through public auction.

There are hundreds of Treasury auctions every year, auctioning off Treasury bills, notes, bonds, and Treasury inflation-Protected Securities (TIPS) with maturity dates from 4 weeks up. You can check for new and past announcements on the Treasury Direct website, or you can choose to be automatically notified of upcoming auction announcements and auction results via email.

30-year Treasury bonds are released once each month in the first half of the month, with new announcements and re-openings in alternating months. Bond auctions are held during the 2nd week of each month, with the auctioned bonds issued on the 15th or first following working day of the same month.

All 30-year bonds are sold at single-price auctions. This means that all successful bidders are awarded bonds at the price equivalent to the highest yield of accepted tenders.

Bidding

To bid in a bond auction, you should submit a tender with your competitive or noncompetitive bid. You can choose to bid either non-competitively or competitively, but not both ways in the same auction.

In a noncompetitive bid, you agree to purchase a stated value of 30-year bonds at the return rate determined at the auction close, up to a limit of $5 million USD. Most individual investors submit noncompetitive bids to ensure that the bond amount they request will be accepted in the auction.

In a competitive bid, you have to specify the yield you wish to receive. If you bid too low, your entire bid will be accepted, but you will lose out on the rate. If you bid too high, you might receive a portion of the bond amount you request, or you might receive nothing at all. Competitive bids have no capital limits, but the amount you are awarded cannot exceed 35% of the total offering.

All noncompetitive bids for 30-year bonds must be received by noon EST on auction day. Competitive bids must be received by 1 pm EST. The results of all bond auctions are released after each auction.

Payment

If you have a Treasury Direct account, payments for your bonds will be withdrawn automatically from your designated checking or savings account. Otherwise, you can pay by certified personal check, cashier’s check, or a Federal Reserve Bank check.

Treasury Direct

To participate in a Treasury bond auction, you can either ask your broker or financial institution to bid on your behalf, or you can set up an Internet-based account in Treasury Direct. As with all web accounts, the Treasury Direct account is accessed through a password and is available at all hours. You will also be able to use your Treasury Direct account to purchase and hold bills, notes, and TIPS.

With a Treasury Direct account, paper securities are a thing of the past. Treasury Direct securities are recorded electronically in your account.

Although Legacy Treasury Direct accounts are also available, they are noncompetitive only. Thus, you cannot use a Legacy Treasury Direct account to offer competitive bids on 30-year bonds.