TIPS Auction Step By Step: Place the Order

This is part three of the TIPS auctions series. Other posts in this series are:

• TIPS Auction Step By Step: Know the Schedule
• TIPS Auction Step By Step: Read the Announcement
• TIPS Auction Step By Step: Read the Results

If you are interested in TIPS but you don’t want to be bothered with auctions, you can buy TIPS in a mutual fund or ETF. See Individual TIPS Or TIPS Mutual Fund.

Say you decided to buy some TIPS from the auction. How do you place your order?

Although it’s an auction, you don’t really enter a bid as you do in an eBay auction. Only financial institutions who buy TIPS in the millions bid in the auction. You get to tag along with a so-called “non-competitive bid” which means you accept the final price from the auction no matter what it is. And that’s not a bad thing. Because all orders — from both the big guys and you — get the lowest price (highest yield) from the auction, your small non-competitive bid for $1,000 is treated the same as a $100 million bid from a large bank. Isn’t that nice?

If you are going to buy TIPS in a taxable account, you can buy them from either TreasuryDirect or in a brokerage account. If you want to buy in an IRA, you have to use a brokerage account. Vanguard, Fidelity, and Schwab are all good brokerage choices because they don’t charge any fees for buying TIPS at auction.

The process to place an order for a TIPS auction in a brokerage account is the same as the process to place an order for a new-issue Treasury Bill or Treasury Note. You just look for the TIPS in the list of Treasuries to buy. See How To Buy Treasury Bills & Notes Without Fee at Online Brokers.

Make sure to get your order in by the night prior to the auction date.

Next step: Read the auction result.