Gyroscopic Investing

If I buy bonds or bills through my broker (Vanguard) instead of through treasury direct, am I exposing myself to unnecessary counter-party risk?

No. You own them. If your broker goes under you might have to wait for things to get sorted out. Having said that T Direct is a smidge safer and you won't have the above hassle factor.

The trade off is additional safety vs. flexibility

When you buy through a broker, the broker owns the bonds, not you. You also incur an expense (the bid-ask spread) to buy and then sell. Some brokers (Schwab I believe) also charge fees to sell.

Buying through Treasury Direct eliminates those issues, but you have to buy new-issue bonds and then either hold them to maturity or transfer to a broker to sell. So you end up incurring the bid-ask spread anyway, if you sell a bond. Also, TD is only an option for taxable purchases.

I (and others here) use Treasury Direct to buy T bills with auto rollover to create a DIY money market in taxable. I haven't used them to buy long bonds, mainly because linking accounts to TD is a PITA.

sophie wrote:transfer to a broker to sell

Have you ever done this? If so, how long did it take?

sophie wrote: I (and others here) use Treasury Direct to buy T bills with auto rollover to create a DIY money market in taxable. I haven't used them to buy long bonds, mainly because linking accounts to TD is a PITA.

Suppose you needed to access a lot of your cash in a hurry. You'd need to first transfer the bills to a broker to sell, right?

Here's the process for transferring treasuries to a broker:

https://www.treasurydirect.gov/indiv/re ... d_sell.htm

I ended up going with my broker. At some point I might move half over to Treasury Direct for institutional diversification.

Thanks for the responses, all!

Jack Jones wrote:Here's the process for transferring treasuries to a broker:

https://www.treasurydirect.gov/indiv/re ... d_sell.htm

Thanks for posting that, Jack.
I've got all my bonds in Vanguard and Fidelity. When the time comes (shaking fist) they better give me my money back!