U.S. Treasury securities are some of the safest investments you can own. You can buy them through your investments broker, or you could cut out the middle man and buy direct from the government through the Bureau of Public Debt's TreasuryDirect system. This Internet-based system replaces the older, non-Internet-based Legacy Treasury Direct book-entry system.
Some investment pros still refer to the interest rate on bonds as their coupon rate. This term harkens back to the days when bearer bonds came with coupons attached. As each interest payment came due, the bondholder would clip the corresponding coupon and present it to his bank for payment. The U.S. Treasury no longer issues bearer bonds with coupons, although it is still possible to buy Series I savings bonds in paper form. Instead, U.S. government bonds are issued in electronic form and kept in book-entry accounts. The bureau established the Legacy Treasury Direct system in 1986 to service those accounts.
Legacy Treasury Direct
About 348,000 customers, mostly individual investors, held more than $67 billion in U.S. government securities in the Legacy Treasury Direct system as of April 2012, according to the bureau. If you have securities in a Legacy Treasury Direct account, you can rest easy -- your investments are still safe and secure. But with the Internet, the old system has become antiquated, and the bureau encourages Legacy Treasury Direct account-holders to transfer their securities to the newer, more efficient TreasuryDirect system.
The Legacy Treasury Direct system is being phased out. You can't open a new Legacy account and you can no longer buy Treasury securities with your existing account. You can still manage your old account by mail, through an automated telephone system and on a limited basis through the Web. You can transfer securities between Legacy Treasury Direct accounts, and you can transfer securities out of your Legacy account to your broker, banker or new TreasuryDirect account, but you can't transfer securities into your Legacy account from an outside account.
Legacy vs. TreasuryDirect
You can use your TreasuryDirect account to buy different types of Treasury securities, including savings bonds, T-bills, T-notes, T-bonds and Treasury inflation-protected securities. You can't buy any securities with your Legacy account. There is no annual maintenance fee for your TreasuryDirect account. Legacy accounts with more than $100,000 are charged a $100 yearly maintenance fee. TreasuryDirect gives you unlimited online access to your account 24/7. Online access to your Legacy account is limited to 8 a.m. to midnight EST.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.