Low-denomination Treasury securities and small investor access

¶ … investors hoping to put their money into Treasury bills, notes, and bonds could only do so if they were willing to invest in $1,000 increments. That system had ruled for the past decade, and meant that small investors were unable to invest in Treasurys. Furthermore, people could not invest uneven amounts in Treasurys, since they could only be purchased in $1,000 increments. This change means that the average person can purchase a Treasury, putting it on par with the savings bond as a mass-market investment option. In addition, this new availability may make Treasurys more attractive than mutual funds or bank deposits, now that investors are not locked into purchasing them in $1,000 increments.

The new availability of Treasurys may not have much a practical impact on the small investor. Right now, Treasury yields are so low that regular savings accounts may offer a better investment return. However, few investments offer the same type of long-term and short-term safety and security as a Treasury. Therefore, the new availability of low-denomination Treasurys gives investors another option when looking for a place for their cash. However, many investors will still find saving bonds to be a better option than Treasurys. While bonds can lock up money for a long time, investors can cash out with minimal penalties after a year and with no penalty after five years. In contrast, Treasurys lock investors into a set term, and early sellers are at the mercy of the market, plus they face the possibility of service charges. However, for investors seeking to create laddered security portfolios, the Treasury program could be very useful.