Should I hold my Treasury securities until maturity?

Q: Earlier you said on your blog the rate on Treasuries is determined by auction. Everyday on T.V. I see the rate on the 10 year fluctuate. What causes that? What makes it go down? I thought if I bought notes through a Brokerage (in my IRA) it would be like Treasury Direct. I do not plan to hold for 10 years and will sell when I need to take a distribution. I would like to know the best time to do this. I think the lower it goes, the better. Is there a place to read about this subject?

A: Go to www.TreasuryDirect.gov for more info on Treasury notes. T-bills (30.90 days) are sold at auction every weel and 2, 3 and 10 year notes are sold monthly or quarterly. But there is a huge trading market every day between government securities dealers, so depending on concerns about interest rates, inflation, etc. the prices -- and the yields -- change minute by minute when the market is open -- and those are the prices you see quoted daily.

If you're not planning to hold Treasury securities to maturity, then you're better off buying a short-term Treasury securities fund, such as those offered by American Century. It's not wise to sell Treasuries before maturity -- even with that huge trading market -- because individual investors selling small lots get "ripped off" in price and commissions! That destroys the advantage of these securities.

So either use shorter maturities of T-bills "laddered" to mature at staggered dates, or use CDs or Treasury-only funds for retirement withdrawals.

Terry Savage is a registered investment advisor and the author of the newly published The Savage Number: How Much Money Do You Need To Retire? (256 pages, Wiley, $24.95).