2025 US Treasury Investing Complete Guide: Understand What US Treasuries Are, How to Buy, and a Full Summary of All Channels in One Article!

In the current environment of global economic volatility, seeking stable investment instruments has become a common goal for many people, and “US Treasuries” are undoubtedly a major focus in the market. Are you curious about what US Treasuries are, yet unsure where to begin? This guide will take you from the basic concepts to the actual process of how to buy US Treasury bonds, provide an in-depth analysis of the various channels for buying US Treasuries in Taiwan, and compare the pros and cons of buying US Treasuries through overseas brokers versus sub-brokerage accounts, helping you master the essence of US Treasury investing and hedging strategies. 

What Are US Treasuries? Essential US Treasury Basics Every Beginner Should Know

US Treasury securities, commonly referred to as US Treasuries, are debt instruments issued by the US Department of the Treasury to raise government funds. Backed by the credit of the US government, US Treasuries are widely regarded as one of the safest investment instruments in the world. With high liquidity and low credit risk, they play a crucial role as the “risk-free rate” benchmark in global financial markets. For investors seeking a more stable asset allocation, understanding what US Treasuries are is the essential first step. 

Why Invest in US Treasuries? Three Major Attractions of US Treasuries (Safety, Stable Income, Hedging)

• High Safety: The US government holds the highest credit ratings, with an extremely low risk of default. As a result, US Treasuries are considered among the safest assets globally. During periods of economic uncertainty, capital often flows into US Treasuries in search of safety.
• Stable Income: US Treasuries typically provide fixed interest payments (coupon rates), allowing investors to receive predictable cash flow. Although yields fluctuate with market conditions, they can remain attractive during certain periods.
• Hedging Function: During market turbulence or equity market declines, US Treasuries often serve a hedging role, with price movements that tend to be negatively correlated with equities. This makes them an effective tool for risk diversification within an asset allocation.

What Types of US Treasuries Are There? A Complete Guide to Short-Term, Medium-Term, Long-Term Government Bonds and Zero-Coupon Bonds

US Treasury securities are primarily classified based on their maturity lengths into the following categories:

• Treasury Bills (T-Bills): Maturities of one year or less, usually issued at a discount and redeemed at face value at maturity. They do not pay fixed interest and are a type of zero-coupon bond.
• Treasury Notes (T-Notes): Maturities ranging from 2 to 10 years, with interest paid semiannually. These are classified as medium-term bonds.
• Treasury Bonds (T-Bonds): Maturities of more than 10 years (typically 20 or 30 years), with interest paid semiannually. These are long-term bonds.
• Treasury Inflation-Protected Securities (TIPS): The principal value adjusts in line with the Consumer Price Index (CPI), providing protection against inflation.
• Zero-Coupon Bonds: Issued at a discount and redeemed at face value at maturity, with no interest payments during the holding period. Investors earn the price difference between the purchase price and the face value. Many long-term US Treasuries can also be structured into zero-coupon bond form.

Understanding these different types of US Treasuries helps investors choose the most suitable US government bond investment instruments based on their investment objectives and risk tolerance.

How to Buy US Treasuries? An Analysis of Three Mainstream Channels for Taiwan Investors

For Taiwan investors, there are multiple channels to purchase US Treasuries. Below is an in-depth analysis of the three most common methods, helping you make a clearer choice when buying US Treasuries in Taiwan. 

Channel One: Buying US Treasuries Through “Sub-Brokerage”, Pros, Cons, and Fee Analysis

“Sub-brokerage” refers to placing orders to purchase US Treasuries through a Taiwan securities firm, which then executes the trades via overseas brokers. This is a relatively convenient and familiar channel, especially suitable for investors who are not familiar with overseas trading processes.

• Pros:
  • Operational Convenience: Uses an existing Taiwan securities account, allows direct deduction in TWD or foreign currencies, and offers a Chinese-language trading interface.
  • Capital Safety: Funds circulate within the Taiwan securities brokerage system, aligning well with the habits of Taiwan investors.
  • Tax Handling: Taiwan securities firms usually provide relevant tax information, making tax filing more convenient.
• Cons:
  • Higher Fees: Usually includes transaction fees, custody fees, and other charges, resulting in relatively higher overall costs.
  • Fewer Choices: The types and quantities of US Treasuries available may be more limited compared to purchasing directly through overseas brokers.
  • Exchange Rate Risk: If settlement is conducted in TWD, investors still need to bear exchange rate fluctuation risk.
• Fees: Depending on each securities firm’s rules, buy-side fees are approximately 0.1% to 1%, sell-side fees are approximately 0.1% to 1%, and minimum fee thresholds usually apply. Some securities firms may also charge custody fees.

Channel Two: Buying US Treasuries Directly Through “Overseas Brokers”, Who Is It Suitable for?

Opening an account directly with an overseas broker to purchase US Treasuries offers a wider range of choices and lower transaction costs, but requires investors to have a certain level of English proficiency and knowledge of overseas trading.

• Pros:
  • Lower Costs: Transaction fees and custody fees are usually lower than sub-brokerage, and some brokers even offer zero-commission trading.
  • Diverse Products: Direct access to a wide range of US Treasuries, including different maturities and issuance sizes, providing greater flexibility.
  • Trading Flexibility: Trading hours are synchronized with US markets, offering high immediacy.
• Cons:
  • More Complex Account Opening: Requires more documentation, a longer process, and may involve communication in English.
  • Fund Transfers: Requires international wire transfers, which may incur remittance fees and exchange rate spreads, and involve longer processing times.
  • Tax Reporting: Overseas income tax reporting must be handled independently, making the process more complex.
• Suitable for: Investors with sufficient foreign language ability, experience in overseas trading, and a preference for lower costs and broader product selection. For small-scale investors, the lower entry thresholds offered by overseas brokers are also a major attraction.

Channel Three: Other Indirect Ways to Invest in US Treasuries (Such as US Treasury ETFs and Bond Funds)

In addition to directly purchasing individual US Treasuries, investing indirectly through US Treasury ETFs or bond funds is also a common approach. These two instruments offer greater diversification and convenience.

• US Treasury ETFs:
  • Pros: By holding ETFs that track US Treasury indices, investors can gain exposure to multiple US Treasuries in a single investment, achieving risk diversification. They offer high liquidity and can be traded on stock exchanges like stocks.
  • Cons: Management fees apply, and prices are influenced by market supply and demand, meaning they may not always closely track net asset value.
  • Suitable for: Investors seeking diversification, possessing a basic understanding of the US Treasury market, and valuing trading flexibility.
• Bond Funds:
  • Pros: Managed by professional fund managers who actively select bonds, saving investors research time. They offer a broader range of bond options, including US Treasuries and other bond types.
  • Cons: Management fees are typically higher than ETFs, and fund performance is highly dependent on the manager’s execution ability.
  • Suitable for: Investors with limited time for research, those who prefer professional management, and those seeking exposure to the bond market through diversified investment tools.

Buying US Treasuries in Taiwan: Sub-Brokerage Vs Overseas Brokers, Which Is Best for You?

After understanding the two main direct channels for buying US Treasuries in Taiwan, many investors face the choice between “sub-brokerage” and “overseas brokers”. Below is a detailed comparison across account opening procedures, transaction costs, tax handling, and fund transfer liquidity to help you find the most suitable US Treasury investment approach.

Comparison of Account Opening Process, Transaction Costs, Tax Handling, and Fund Transfers

Best Channel Recommendations for Small-Scale Investors and High-Net-Worth Investors

• Small-Scale Investors:

• If your investment amount is relatively small and you are not familiar with overseas trading: It is recommended to consider buying US Treasuries via sub-brokerage at the initial stage. Although fees are relatively higher, the process is simple and the risk is lower. As your investment amount grows or you become more familiar with overseas trading, you can then consider overseas brokers.
• If you pursue lower costs and are willing to learn: The transaction cost advantages of overseas brokers are very clear, making them suitable for US Treasury beginners with limited budgets who are willing to spend time learning.

• High-Net-Worth Investors:
  • Pursuing maximum returns and product diversity: Buying US Treasuries through overseas brokers is usually the first choice. Their broad product selection and lower transaction fees allow high-net-worth clients to conduct asset allocation and execution more flexibly.
  • Valuing convenience and service: Some high-net-worth clients still choose sub-brokerage, especially those who value the Chinese-language services and tax assistance provided by Taiwan securities firms. Although costs are slightly higher, it can save time and effort.

Regardless of which channel you choose, before investing in US Treasuries, be sure to carefully evaluate your investment objectives and risk tolerance, and compare the fees and services of different brokers. 

US Treasury Investing Frequently Asked Questions at a Glance

During the process of understanding what US Treasuries are and how to buy US government bonds, investors often encounter certain questions. Below are several commonly asked questions compiled to help address your concerns.

Q: Can US Treasuries Default? Is Investing in US Treasuries Risky?

A: Although US government bonds are regarded as one of the safest assets in the world, with an extremely low risk of default, they are not completely risk-free. The main risks include:

• Interest Rate Risk: When market interest rates rise, the prices of existing US Treasuries fall because newly issued US Treasuries offer higher yields, reducing the attractiveness of older bonds.
• Inflation Risk: If inflation exceeds expectations, the real purchasing power of fixed-income bonds declines. Treasury Inflation-Protected Securities (TIPS) can help mitigate this risk to a certain extent.
• Exchange Rate Risk: For non-USD investors, if the US dollar depreciates, even with stable US Treasury returns, converting back to the local currency may result in foreign exchange losses.
• Liquidity Risk: Although the US Treasury market is highly liquid, under extreme market conditions, bid-ask spreads for certain US Treasuries may widen.

Overall, the risk level of US Treasuries is far lower than that of risk assets such as equities, but investors should still remain mindful of these potential risks.

Q: Do I Need to Pay Taxes When Buying US Treasuries? (Estate Tax, Interest Income Tax)

A: For Taiwan investors purchasing US Treasuries, the main tax considerations include:

• Interest Income Tax: Under US tax law, interest income earned by non-US residents from holding US government bonds is exempt from US withholding tax. However, if you are a Taiwan tax resident, this overseas interest income must be included in your basic personal income calculation, and tax is only payable if it exceeds a certain threshold.
• Estate Tax: If non-US residents hold US government bonds, they are exempt from US estate tax. However, Taiwan estate tax must still be handled in accordance with Taiwan tax regulations.

Tax rules are complex and subject to change. It is recommended to consult a professional accountant before investing to ensure compliance.

Q: Is a Higher US Treasury Yield Always Better? What Should Be Considered Before Investing?

A: A higher US Treasury yield usually indicates that the market expects interest rates to rise, or that there are concerns about the economic outlook. Although higher yields may appear attractive, the following points should be considered before investing:

• Relationship With Interest Rate Trends: Yields move inversely to bond prices. If interest rates are expected to continue rising, even with high current yields, bond prices may still have downside risk.
• Holding Period: If you plan to hold the bond to maturity, higher yields are more favorable. However, if you may need to sell before maturity, potential capital gains or losses must be taken into account.
• Investment Objective: Are you investing in US Treasuries for stable income, asset allocation, or hedging? Clarifying your objective helps in selecting appropriate yield levels and maturities.
• Global Economic Environment: Pay close attention to Federal Reserve monetary policy, inflation data, and geopolitical factors, all of which influence US Treasury yield movements.

Simply pursuing high yields is not the optimal strategy. More importantly, yields should be considered in conjunction with your overall investment strategy and market assessment.

Q: What Are the Potential Risks of Investing in US Treasuries?

A: In addition to the interest rate risk, inflation risk, and exchange rate risk mentioned above, investing in US Treasuries may also involve reinvestment risk (when a bond matures and market interest rates decline, reinvestment returns may be lower) and credit risk (although the credit risk of US Treasuries is extremely low, it theoretically still exists). For beginners in US Treasury investing, understanding these risks is an important part of building proper asset allocation.

Q: How Can I Determine Whether US Treasuries Are Suitable for My Investment Portfolio?

A: Determining whether US Treasuries are suitable requires consideration from the following perspectives:

• Investment Objectives: Are you seeking stable capital preservation, regular income, or portfolio hedging? US Treasuries are generally suitable for conservative and stability-focused objectives.
• Risk Tolerance: How much market volatility can you accept? The volatility of US Treasuries is usually lower than that of equities.
• Investment Horizon: Do you plan to hold in the short term or hold to maturity over the long term? US Treasuries with different maturities have different characteristics.
• Overall Asset Allocation: US Treasuries can serve as part of a diversified portfolio to reduce overall portfolio risk.

Investors are advised to view US Treasuries as a stable cornerstone within asset allocation, pairing them with other risk assets to achieve balance. 

Master US Treasury Investing and Add Stability to Your Asset Allocation!

Through this comprehensive US Treasury investing guide, you should now have a thorough understanding of what US Treasuries are, how to buy US government bonds, and the multiple channels available for buying US Treasuries in Taiwan. From foundational knowledge and comparisons of purchasing channels to tax and risk analysis, we have explored every key aspect of US Treasury investing in depth.

Whether you prefer the convenience of buying US Treasuries via sub-brokerage accounts, seek lower costs and a wider range of options through overseas brokers, or favor US Treasury ETFs for risk diversification, choosing the approach that best suits you is the first step toward successful investing. In today’s highly uncertain financial markets, US Treasuries, as a long-term and stable asset class, are absolutely worth including in your asset allocation considerations. Evaluate the most suitable way to buy US Treasuries now and begin your journey toward steady investing!