Non-competitive bidding at U.S. Treasury auctions lets you buy bills, notes, and bonds without naming a yield: you state the dollar amount you want, and the Treasury guarantees you’ll receive the full amount at whatever yield the auction produces. The minimum bid is $100, the maximum is $10 million per auction, and you can place the bid for free through TreasuryDirect.1TreasuryDirect. Buying a Treasury Marketable Security
Why You Don’t Have to Pick a Rate
Every Treasury auction splits bids into two pools. Non-competitive bids are filled first, in full. Only then does the Treasury turn to competitive bidders, who submit the lowest yields they’re willing to accept. The Treasury works upward through those bids until the offering is covered, and the highest yield it has to accept becomes the stop-out rate. Every winning bidder, competitive and non-competitive alike, receives that same rate.2TreasuryDirect. How Auctions Work
The practical effect for you is twofold. Professional traders set the price, and you get the same yield they do. And unlike competitive bidders, who can be shut out entirely or filled only partially, you’re guaranteed the full par amount you requested.3TreasuryDirect. Auctions In Depth The ordering of the two pools is written into the regulations: non-competitive awards come off the top of the offering, and competitive bidders get what’s left.4eCFR. 31 CFR 356.20 – Determination of Auction Awards
Bid Size Limits
Non-competitive bids are capped at $10 million per bidder per auction. The cap applies to each specific security offering, so bidding $10 million on a 13-week bill and another $10 million on a 10-year note auctioned the same week is allowed. If you’re reinvesting the proceeds of a maturing security held directly with the Treasury, the cap doesn’t apply to that reinvestment.5eCFR. 31 CFR 356.12 – What Are the Different Types of Bids and Do They Have Specific Requirements or Restrictions
On the low end, the minimum bid for any Treasury marketable security is $100, with larger amounts in the multiples stated in the auction announcement.1TreasuryDirect. Buying a Treasury Marketable Security
You can’t split yourself across accounts to get around the cap. The Treasury treats persons or entities that intentionally act together on bids as a single bidder, and a corporation plus its affiliates counts as one.6FindLaw. 31 CFR Part 356 Appendix A – Bidder Categories
How to Place a Non-Competitive Bid
You have two channels. TreasuryDirect, the government’s own portal, charges no fees of any kind.7TreasuryDirect. Where You Hold Your Securities A bank, broker, or dealer that participates in the commercial book-entry system can also submit the bid for you, though they may charge transaction fees or commissions. Check before you place the order.
Opening a TreasuryDirect Account
Individuals need a Social Security number, an email address, and the routing and account numbers for an ACH-enabled bank account. Entities such as corporations, trusts, or estates use an Employer Identification Number instead.8TreasuryDirect. Open An Account The linked bank account handles both the purchase debit and the eventual return of principal and interest.
Submitting the Bid
Inside the bidding interface you pick the security type, the term, and the dollar amount. Non-competitive bids submitted through TreasuryDirect must typically arrive by noon Eastern Time on auction day, but each auction announcement states the exact deadline, so check the announcement for the specific security you want.9TreasuryDirect. Timeline of U.S. Treasury Auctions You’ll get a confirmation number after submitting. On the security’s issue date, the system debits your bank account and the security appears in your TreasuryDirect holdings.10TreasuryDirect. TreasuryDirect FAQ
What You Pay and What You Get Back
How you earn your return depends on which Treasury security you bought.
Bills, which mature in one year or less, are sold at a discount to face value. You pay less than $1,000 for a $1,000 bill, and the difference you collect at maturity is your return. The Treasury calculates the price as: Face Value × (1 − (discount rate × days to maturity) / 360). A 26-week bill at a 4% discount rate works out to roughly $979.78 per $1,000 of face value.11TreasuryDirect. Understanding Pricing and Interest Rates
Notes and bonds work differently. They typically sell close to face value and pay a fixed coupon every six months. Your purchase price may land slightly above or below par depending on where the stop-out rate falls against the coupon, but the semiannual interest is the main source of return.
At maturity, if you haven’t scheduled a reinvestment, the Treasury deposits the face value (plus any final interest payment for notes and bonds) into your linked bank account. The security disappears from your holdings. Nothing is required from you.
Automatic Reinvestment
You can schedule a security to automatically roll into a new one of the same type and term when it matures. TreasuryDirect places a new non-competitive bid on your behalf. How many consecutive reinvestments you can queue at one time depends on the term:
- 4-week bills: up to 25
- 13-week bills: up to 7
- 26-week bills: up to 3
- All other marketable securities: 1
These are limits on how many you can line up at once, not lifetime caps. Once a cycle completes, you can schedule another. If no matching security is available on the maturity date, the reinvestment is canceled and the proceeds go to your designated bank account or to your TreasuryDirect Certificate of Indebtedness.12eCFR. 31 CFR 363.205 – How Do I Reinvest the Proceeds of a Maturing Security Held in TreasuryDirect
Selling Before Maturity
TreasuryDirect is designed for buy-and-hold investors. To sell a security before it matures, you first have to transfer it out of TreasuryDirect into the commercial book-entry system through a bank, broker, or dealer. There is also a mandatory 45-day holding period: no security can be sold or transferred during the first 45 days after its issue date. That makes 4-week bills bought through TreasuryDirect impossible to sell early, since they mature before the hold expires.13TreasuryDirect. Selling a Treasury Marketable Security
On the secondary market, prices move inversely with interest rates. If rates have risen since you bought, your fixed-rate security is worth less; if rates have fallen, it’s worth more. Longer terms swing harder. If you hold to maturity, none of this touches you: the Treasury pays full face value regardless of what rates did in between.
Taxes on the Interest
Interest on Treasury securities is subject to federal income tax but exempt from state and local income taxes. The exemption comes from federal law covering obligations of the U.S. Government.14Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation The only carve-outs are nondiscriminatory franchise taxes on corporations and estate or inheritance taxes.
In a high-tax state, that exemption can make the after-tax yield on a Treasury meaningfully better than a corporate bond or CD paying the same nominal rate. You’ll receive a 1099-INT each year reporting the interest, and you report it on your federal return. For a bill bought at a discount, the gap between purchase price and face value is treated as interest income in the year the bill matures.