How to make an ultra-low-risk 5% return buying bonds

• Returns from the Treasury market are growing more attractive with yields hovering near 5%, the highest since 2007.
• Investors can purchase these nearly risk-free assets directly from the government, using TreasuryDirect.gov.

It may be time to load up on US debt as Treasury yields hover around 5%, offering investors healthy, ultra-low-risk returns while the stock market continues to be hit with volatility.

That represents a major shift in the market landscape. Previously, years of ultra-low rates sent investors toward stocks as the main source of returns. But with yields on 10- and 30-year bonds now at the highest levels since 2007, Treasurys are rocketing back into investors' line of sight.

That comes after the Federal Reserve hiked benchmark rates 11 times in a year and a half to fight inflation, causing bond yields to soar as well.

And while it appears the Fed is close to or at the end of its tightening cycle, bond yields remain under upward pressure as demand for fresh debt has been lackluster. When the government has more trouble finding buyers for new Treasurys, yields will rise to attract interest.

Retail investors can gain exposure to these assets by buying into Treasury ETFs, such as TLT. But this is a much more volatile trade than buying an actual bond. While the value of bonds can see daily market fluctuations that impact the price of ETFs, the US has never defaulted on its debt, making the purchase of Treasurys themselves a nearly risk-free proposition.

"If you can get more than 4% on Treasurys, that makes you think twice about a lot of risky investments," Matthew Liebman, founding partner at Amplius Wealth Advisors, recently told Bloomberg.

Here are the two main avenues an investor can use to get ahold of these securities:

TreasuryDirect.gov

This official government website is the central resource for any investor looking to purchase Treasurys electronically. Setting up an account only requires a Social Security number (or another form of tax identification), email address, and bank account information.

Once an account is active, investors can choose which asset to purchase, organized by the duration of the Treasury.

Shorter-term Treasurys like T-bills, while have a duration of less than a year, only pay interest at the security's mature date.

But long-dated Treasurys give investors a fixed interest payment every six months until the security matures.

Once a security is selected, investors can choose how much of it they wish to buy, and the Treasurys are sold to them at the next auction. T-bill sales happen weekly, notes that mature in two to 10 years are sold are monthly, and bonds with 20- or 30-year durations are auctioned four times a year.

Treasury purchases can be reinvested automatically at the next auction, once the original asset matures.

Brokerages and banks

Buying bonds via on TreasuryDirect has a few drawbacks. For instance, holders can't sell their bonds directly from a TreasuryDirect account. Instead, they first have to be transferred to a broker or dealer.

In addition, the TreasuryDirect website only sells new Treasurys, and previously-issued bonds will not be found there.

For greater access to the Treasury market, investors can turn to brokerages and some commercial banks, which act as the primary intermediaries of US debt.

Though their services may come with a commission or require a minimum purchase amount, these dealers allow investors to participate in both Treasury auctions and the secondary market.

By using a broker to buy bonds in the secondary market, investors can also add Treasury assets into tax-free accounts, such as a Roth IRA.