Can H1B Visa Holders Purchase Treasury Bills, Notes, or Bonds? And Why Should They Consider Investing in US Treasury?

Key Points:

• Treasury bills (T-bills), Treasury notes (T-notes), and Treasury bonds (T-bonds) are debt securities issued by the United States Treasury Department and are considered some of the safest investment options.
• T-bills are short-term securities with a maturity of one year or less, while T-notes have maturities ranging from two to ten years, and T-bonds have maturities exceeding ten years.
• T-bills are sold at a discount from their face value and do not pay interest. Investors receive the face value of the bill when it matures, resulting in a profit. T-notes and T-bonds have fixed interest rates paid semi-annually.
• T-bills are issued in various denominations, including $1,000, $5,000, $10,000, $25,000, $50,000, and $100,000. T-notes and T-bonds are issued in $1,000 denominations.
• T-bills are considered the least risky of the three securities due to their short-term nature. T-bonds, with their longer maturities, are considered the riskiest as they are more sensitive to changes in interest rates.
• T-bills generally have the lowest yield among the three securities, while T-bonds offer the highest yield due to their longer-term nature.

Investors often consider three popular options when investing in fixed-income securities: Treasury bills, notes, and bonds. While these three instruments are all issued by the United States Treasury Department and considered some of the safest investment vehicles available, they have some key differences. This blog post will discuss these differences and help you understand which option might be best for your investment strategy.

Eligibility Requirements for Opening a TreasuryDirect Account

• Valid Social Security Number (SSN) required for individuals
• Individuals must be 18 years of age or older and legally competent
• Entities must have a valid SSN or Employer Identification Number (EIN)
• United States address of record is necessary for the account owner
• Account at a U.S. depository financial institution accepting ACH payments is required
• U.S. person" in the online application includes eligible individuals and entities

A definition of a "U.S. person":

A "U.S. person" refers to an individual or entity that is considered eligible to open a TreasuryDirect account in the United States. In this context, it typically includes individuals who are U.S. citizens, lawful permanent residents (green card holders), and certain qualifying resident aliens. Entities, it generally includes businesses, organizations, and legal entities that are formed or incorporated in the United States, as well as those that are organized under U.S. laws or regulations. The definition of a U.S. person may vary depending on the specific legal and regulatory frameworks involved, and it is essential to consult the relevant guidelines and authorities for precise determination of eligibility.

Treasury Bills

Treasury bills, or T-bills, are short-term debt securities with a one-year or less maturity. They are sold at a discount from their face value and do not pay interest like other debt securities. Instead, investors receive the total face value of the bill when it matures. For example, if an investor purchases a T-bill with a face value of $1,000 for $950, they will receive $1,000 when the bill matures, resulting in a $50 profit. T-bills are issued in denominations of $1,000, $5,000, $10,000, $25,000, $50,000, and $100,000. They are sold at a discount from their face value and mature at face value. For example, if you buy a $1,000 T-bill with a 6-month maturity and a discount rate of 1%, you will pay $995 upfront and receive $1,000 when the T-bill matures in 6 months. The difference between the purchase price and the face value is your return on investment. They are generally considered one of the safest investments available, as the full faith and credit of the US government back them.

Treasury Notes

Treasury notes, or T-notes, are medium-term debt securities with two to ten years maturities. They are issued with a fixed interest rate, which is paid semi-annually. T-notes are sold in denominations of $1,000 and are also considered relatively safe investments, as the full faith and credit of the US government back them. They are often used by investors seeking a higher yield than T-bills but unwilling to take on the risk of longer-term debt securities. For example, if you buy a $10,000 Treasury note with a 5-year maturity and a coupon rate of 2%, you will receive $200 in interest payments every six months for five years and then receive the $10,000 face value when the note matures.

Treasury Bonds

Treasury bonds, or T-bonds, are long-term debt securities with more than ten years of maturity. Like T-notes, they are issued with a fixed interest rate paid semi-annually. T-bonds are sold in denominations of $1,000 and are considered relatively safe investments. They are often used by investors seeking a higher yield than T-notes and willing to take on the risk of longer-term debt securities. For example, if you buy a $100,000 Treasury bond with a 20-year maturity and a coupon rate of 3%, you will receive $3,000 in interest payments every six months for 20 years and then receive the $100,000 face value when the bond matures. Because they have longer maturities, T-bonds are more sensitive to changes in interest rates than T-notes or T-bills.

Critical Differences Between T-Bills, T-Notes, and T-Bonds

1. Maturity: T-bills have a maturity of one year or less, T-notes have a maturity of two to ten years, and T-bonds have more than ten years.
2. Interest rate: T-bills do not pay interest. T-notes and T-bonds have a fixed interest rate that is paid semi-annually.
3. Denominations: T-bills are issued in denominations of $1,000, $5,000, $10,000, $25,000, $50,000, and $100,000, while T-notes and T-bonds are issued in denominations of $1,000.
4. Yield: T-bills have the lowest yield of the three securities, as they are the shortest-term, while T-bonds have the highest yield, the longest-term.
5. Risk: T-bills are considered the least risky of the three securities, while T-bonds are considered the riskiest due to their longer maturities.

How To Buy And Invest In T-Bills, T-Notes, and T-Bonds

Individual investors can buy T-bills, notes, and bonds directly from the U.S. Treasury through the Treasury Direct website.

To buy T-bills, notes, and bonds through Treasury Direct, follow these steps:

• Set up a Treasury Direct account: Go to the Treasury Direct website and click the "Open An Account" button. Follow the steps to set up your account.
• Choose your security: Once your account is set up, select the security you want to buy. T-bills are available in 4, 8, 13, 26, and 52-week maturities. Notes are available in 2, 3, 5, 7, and 10-year maturities. Bonds are available in 20 and 30-year maturities.
• Enter your bid: Enter the amount you want to invest in your selected security.
• Submit your bid: Once you have entered your bid, review your information and submit your bid.
• Pay for your purchase: Once your bid is accepted, you will need to pay for your purchase. You can use funds from your Treasury Direct account or transfer funds from an external bank account.
• Receive your securities: Once your purchase is complete, your T-bills, notes, or bonds will be deposited into your Treasury Direct account.

When Is The Right And Wrong Time To Buy And Invest in T-Bills, T-Notes, and T-Bonds

The right or wrong time to buy and invest in T-bills, notes, and bonds will depend on various factors, including the current economic climate, interest rates, and financial goals and circumstances.

Generally, investing in T-bills, notes, and bonds can be a good option for those seeking a safe and stable investment with relatively low risk. T-bills, notes, and bonds are among the safest investments available, as the US government backs them.

If you want to invest in T-bills, notes, or bonds, consider the current interest rates. When interest rates are low, investing in longer-term bonds or notes may be a good time, as these tend to have higher yields than short-term T-bills.

It's important to note that there may be better choices than investing in T-bills, notes, and bonds. Consider other investments, such as stocks or real estate, if you want higher returns.

Ultimately, investing in T-bills, notes, or bonds will depend on your financial situation and goals. Doing your research and speaking with a financial advisor before making any investment decisions is important.

It's important to note that there may be better options than buying T-bills, notes, and bonds through Treasury Direct. If you are unsure about investing in these securities, consider speaking with a financial advisor or doing additional research before making investment decisions. In conclusion, Treasury bills, notes, and bonds are all debt securities issued by the United States Treasury Department, considered some of the safest investments available.