Bond Investors Face Delays Moving Their Money From TreasuryDirect
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What is the main topic discussed in this episode?
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Here's your Money Briefing for Thursday, October 17th. I'm J.R. Whelan for The Wall Street Journal.
What is TreasuryDirect and why did account sign-ups surge?
Over the past couple of years, Americans rushed to the Treasury Department's Treasury Direct website to buy inflation-adjusted savings bonds that were paying nearly 10% interest. Now, as many of them want to move their investments out and into their brokerage account, they're stuck, having to wait as long as a year to do it.
I spoke with one investor from Maryland who had purchased a 20-year bond. And only after he submitted that transfer request did he learn about this one-year delay. And he was distraught. He said to me that if he expected his money to be locked up for up to a year, he would have just bought a CD.
We'll talk with our personal finance reporter, Amani Moiz, about what you can do about the delays and alternative ways of buying treasuries. That's after the break.
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How do I-bonds differ and why did investors rush to buy them?
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People who want to transfer their bond investments out of the Treasury Department's Treasury Direct platform are facing significant and frustrating delays. Wall Street Journal personal finance reporter Imani Moise joins me.
What customer-service problems is TreasuryDirect facing now?
First of all, Imani, catch us up for a moment. What is Treasury Direct?
Treasury Direct is basically a direct-to-consumer website offered by the government that allows consumers to buy treasuries and other kinds of investments directly from the government instead of going through a third party. A third party would be a brokerage like Fidelity. And back in the day, you can't do this anymore. You could actually go buy a paper savings bond from your bank.
The number of accounts on that site grew to more than 4 million last year. Why is that?
Well, there was a surge in demand last year when inflation was rising because I-bonds, a special kind of savings bond that's pegged to inflation, they were offering rates that were almost 10%. So a lot of people wanting to lock in those yields rushed to Treasury Direct to buy those bonds because Treasury Direct is the only place where you can get them.
You report that Treasury Direct is dealing with a deluge of customer service requests. What's going on?
Accounts have grown more than five times what they were pre-pandemic levels. So what the Treasury says is that they're really constrained when it comes to resources, technology to really service all of those accounts. So that's led to a backlog.
And part of that backlog is people who want to sell the holdings they have through Treasury Direct.
What is the step-by-step process to transfer securities out of TreasuryDirect?
Take us through the process. What steps do people have to take when they want to move an investment out?
So the first thing that you have to figure out is whether or not your investment can be sold at all. So if it's a savings bond, like an I-bond that I was talking about earlier, those can't be sold at all. So they have to be held in Treasury Direct. Now, if you buy a marketable security, which means it can be sold, that would be a regular treasury, a bill, note, a bond up to 30 years, then you can sell those on the secondary market. But since you cannot sell on Treasury Direct itself, you'd have to transfer those to a brokerage.
So you can't sell your investment through Treasury Direct. Do you have to move it over to your brokerage to do that?
Exactly. You cannot access secondary markets through Treasury Direct at all. So then once you decide that you want to transfer your investment, you have to wait a 45-day period that Treasury Direct requires you to hold on to that security before you're able to sell it.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:01–0:37
2
What is TreasuryDirect and why did account sign-ups surge?
0:37–1:37
3
How do I-bonds differ and why did investors rush to buy them?
1:37–2:17
4
What customer-service problems is TreasuryDirect facing now?
2:17–3:26
5
What is the step-by-step process to transfer securities out of TreasuryDirect?
3:26–5:03
6
Why are external transfers taking up to 12 months to process?
5:03–6:55
7
How does TreasuryDirect liquidity compare to buying treasuries through a brokerage?
6:55–8:11
8
What practical workarounds can investors use to avoid long transfer delays?
8:11–9:41
Speakers
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