Short-term Treasury yields are hitting new highs, making risk-free securities even more attractive to investors seeking safety and income at a time when market returns are low. The 2-year Treasury yield fell to 4% on Wednesday, the highest level for the bond since 2007. Bond yields move inversely at their prices. The 2-year note is at the point on the Treasury yield curve that is most sensitive to Federal Reserve rate hikes. Central bank leaders are expected to hike rates by 0.75 percentage points Wednesday afternoon in a bid to tame inflation. The consumer price index rose by 0.1% in August. Economists surveyed by the Dow Jones expected a 0.1% decline. With the yield curve reversed, short-term bonds now have higher yields than long-term ones. These short-term bonds are now even more attractive considering the lackluster performance of equities this year. The S&P 500 fell nearly 19% in 2022. Bond king Jeffrey Gundlach, CEO of DoubleLine Capital, said in a recent webcast that after several brutal years, the fixed income market is now the place to be. “The opportunities are more exciting now than ever, in my view, in the past 10 years,” he said. The Gundlach firm recently bought long-term Treasuries. CNBC’s Jim Cramer, on the other hand, bought 2-year Treasury notes for his personal wallet. For the first time in a long time, returns are more competitive than equity returns, he said. With short term notes, investors can get the high yield without a long term commitment. For those looking to get a piece of the action, here’s what you need to know. A Direct Government Purchase You can purchase Treasury directly from the US government through its website, TreasuryDirect.gov. You will need to open an account and link your bank to the website. Banknotes are sold in $ 100 increments and are generally issued within a week of the auction date. Auctions for 2-, 3-, 5- and 7-year Treasuries occur every 4 weeks, while the 10-year auction occurs every quarter. Buying notes makes income planning easy. “If you buy an individual Treasury and hold it to maturity, you know what your interest will be and you know what your maturity value is,” said qualified financial analyst Tim Utecht, chief investment officer of Life Planning Partners, based in in Jacksonville, Florida. “You know exactly what you will get.” You will receive interest paid twice a year. If you hold the Treasury until it matures, you are unaffected by market risk. The downside to owning the stock instead of investing in a Treasury fund is the lack of diversification, unless you are climbing the bonds on your own. You will also need to make sure that you buy Treasury bills based on your goals and time horizon. Investments are also segregated from your other accounts, said certified financial planner Diahann Lassus, head of management at Peapack Private Wealth Management in New Providence, New Jersey. “For people who want to see it all together, it’s a little bit more difficult,” he said. Also, you can’t buy them in your IRA or Roth IRA, which Lassus says is the biggest drawback. If you want to sell the bond before it reaches maturity, you can’t do it on the government website. Instead, you will need to transfer it to a bank, broker or reseller. Buying Treasury Bonds from an Intermediary You can also buy Treasury bonds on the secondary market by going through a brokerage firm. You will still have all the advantages of owning the security directly. For Utech, this is the easiest way to buy bonds, calling the government website “a bit cluttered”. Online brokers like Fidelity and Charles Schwab have tables listing the returns of the various Treasuries, so you can compare products, he said. In addition to offering secondary market bonds, both Fidelity and Schwab sell newly issued Treasuries. Also note that you may not get the exact time horizon on the note on any secondary Treasury purchases, Utech said. Make sure you check all the minimum purchase requirements and the fees involved. In Schwab and Fidelity, for example, it is free to buy Treasury online, but a broker-assisted operation costs $ 25 and $ 19.95 respectively. At Fidelity, the minimum purchase is $ 1,000 for Treasury bills. What Lassus likes about brokerage is the fact that you have the ability to have your investments all together and you can even add them to an IRA or Roth IRA, he said. Exposure through a bond fund You can also gain exposure to the bond market through mutual funds and exchange-traded funds. “It provides immediate diversification,” Lassus said. For example, a short-term Treasury bond fund might have issues with maturities ranging from one to three years. You can purchase these through your brokerage, which may also make it easier to track performance alongside the rest of your holdings. See below for four short-term Treasury funds. However, funds can experience a price displacement in a year like this and you have the prospect of losses. Also, the income payments can vary as you have several bonds in the fund. Be aware of any fees involved, which could affect your returns. Funds also have turnover and are therefore subject to capital gains tax, unlike individual bonds.