Government bonds are sold directly by the U.S. Treasury, through banks, and through brokers — and the route you choose affects the price you pay and the fees involved

You can buy U.S. Treasury bonds in three ways: directly from the Treasury through TreasuryDirect (an online platform with no fees), from a bank or broker (who may charge commissions), or on the secondary market (where existing bonds trade at prices above or below face value). The Treasury sells new bonds at scheduled auctions throughout the year. If you buy directly from the Treasury, you pay the full auction price with no middleman markup. If you buy through a bank or broker, you may pay a commission. If you buy an existing bond from another investor, the price depends on interest rates and how much time remains until maturity.

The choice matters because fees and pricing can reduce your return. A bond bought at a discount on the secondary market may offer better yield than a new Treasury bond, but you need to understand how bond pricing works to spot the difference. Starting with TreasuryDirect is the lowest-cost entry point if you are buying new bonds directly from the government.

Key Takeaways

  • TreasuryDirect is a free online platform where you can buy new Treasury bonds directly from the U.S. Department of the Treasury with no fees or commissions.
  • Treasury bonds are sold at scheduled auctions; you bid a price or accept the non-competitive bid rate, and the Treasury announces the results within days.
  • Banks and brokers also sell Treasury bonds but may charge commissions or markups that reduce your net return.
  • You can hold Treasury bonds until maturity or sell them before maturity on the secondary market, where prices fluctuate based on interest rate changes.
  • Treasury bonds come in different maturities — 20 years and 30 years are the longest — and longer bonds typically pay higher interest rates but carry more price risk.

Opening a TreasuryDirect account and buying your first bond

TreasuryDirect is the U.S. Treasury's own online platform for buying Treasury securities. To open an account, you visit treasurydirect.gov, provide your Social Security number, create a login, and link a bank account. The process takes about 15 minutes. You do not need a broker or bank account; the Treasury holds your bonds in an electronic account, and interest payments go directly to your bank.

Once your account is active, you can place bids in upcoming Treasury auctions. The Treasury publishes an auction calendar showing when each type of bond will be sold. For example, 30-year bonds typically auction in February, May, August, and November. You log in, select the auction, and decide how much to bid. If you choose the non-competitive bid option, you agree to accept whatever rate the auction produces — this is the simplest route for first-time buyers and guarantees you will receive bonds at that auction.

After the auction closes, the Treasury announces the results within one to three business days. If your bid was accepted, the bonds are credited to your TreasuryDirect account, and your bank account is charged for the purchase price. Interest payments arrive twice a year on the bond's payment dates.

Understanding auction bids and competitive versus non-competitive bidding

At a Treasury auction, you can bid in two ways: competitive or non-competitive. A non-competitive bid means you accept whatever interest rate the auction produces. This is the standard choice for individual investors because it guarantees you will receive bonds. A competitive bid means you specify the exact price or yield you are willing to pay; if your bid is too low, you may not receive any bonds.

The Treasury accepts competitive bids from large institutional investors and dealers first, then fills the remaining auction with non-competitive bids. Individual investors almost always use non-competitive bids because the competitive process favors large players with sophisticated pricing models. On TreasuryDirect, the non-competitive option is the default and the one you should use unless you have a specific reason to bid competitively.

The auction results show the "high yield" — the interest rate that non-competitive bidders receive. This is the rate you will earn if your non-competitive bid is accepted. The Treasury also publishes the auction results online, so you can see what rate was set and compare it to rates on older bonds trading on the secondary market.

Buying Treasury bonds through banks and brokers

Banks and brokers like Fidelity, Charles Schwab, and Vanguard also sell Treasury bonds. The advantage is convenience — you can buy them in the same account where you hold stocks or other investments. The disadvantage is cost. Banks and brokers charge commissions or markups on Treasury purchases, typically ranging from $25 to $100 per transaction, though some firms charge a percentage of the purchase amount.

When you buy through a broker, you can purchase new bonds at upcoming auctions or existing bonds on the secondary market. The broker handles the auction bid on your behalf and adds their fee to your cost. For a $10,000 bond purchase, a $50 commission reduces your effective return by 0.5 percent — small but real over the life of the bond.

Brokers are most useful if you want to buy bonds that are not currently being auctioned by the Treasury, or if you already have an account with them and want to consolidate your holdings. For new Treasury bonds, TreasuryDirect remains the lowest-cost option.

Buying and selling bonds on the secondary market

After a Treasury bond is issued, it trades on the secondary market between investors. You can buy an existing bond from another investor through a broker or bank. The price of a bond on the secondary market depends on how much time remains until maturity and how current interest rates compare to the bond's coupon rate.

If interest rates have fallen since the bond was issued, the bond's price rises — because its coupon rate is now higher than new bonds pay. If interest rates have risen, the bond's price falls. For example, if you own a 30-year Treasury bond paying 4 percent and new 30-year bonds are now paying 5 percent, your bond is worth less because investors can get a better rate elsewhere. The price adjusts so that the bond's yield matches the market rate.

Buying on the secondary market can be useful if you want a specific maturity that is not currently being auctioned, or if you find a bond trading at a discount. However, you pay a broker commission to buy and sell, and you need to understand bond pricing to avoid overpaying. For most individual investors, buying new bonds through TreasuryDirect is simpler and cheaper.

How interest rates and bond maturity affect your return

Treasury bonds pay a fixed interest rate, called the coupon rate, twice a year. The longer the bond's maturity, the higher the coupon rate typically is — because you are lending money to the government for a longer period and accepting more risk that inflation will erode the value of your money. A 2-year Treasury bond might pay 4 percent, while a 30-year bond might pay 4.5 percent.

If you hold the bond until maturity, you receive all coupon payments plus your principal back. If you sell before maturity, your proceeds depend on the bond's market price at the time of sale. Rising interest rates lower bond prices; falling rates raise them. This is why longer-maturity bonds are more volatile — a 1 percent change in interest rates has a bigger impact on a 30-year bond's price than on a 2-year bond's price.

When you are deciding which maturity to buy, consider how long you plan to hold the bond and your tolerance for price fluctuations. If you need the money in five years, a 5-year bond is a natural fit. If you are saving for retirement 20 years away, a longer-maturity bond may offer better yield, but you accept the risk that rates will rise and the bond's price will fall if you need to sell early.

Holding bonds in retirement accounts and taxable accounts

You can hold Treasury bonds in a regular taxable brokerage account, an IRA, a 401(k), or a 529 college savings plan. The account type affects how interest income is taxed. Interest from Treasury bonds is subject to federal income tax but exempt from state and local income tax — a meaningful advantage if you live in a high-tax state.

In a taxable account, you pay federal tax on interest each year as you receive it. In a traditional IRA or 401(k), interest accumulates tax-deferred, and you pay tax when you withdraw money in retirement. In a Roth IRA, interest is tax-free if you follow the withdrawal rules. For this reason, many investors hold Treasury bonds in retirement accounts to defer or eliminate the tax on interest income.

If you sell a bond before maturity in a taxable account, you may owe capital gains tax on any profit (or claim a capital loss if the price fell). This is another reason to consider holding bonds until maturity if you are in a taxable account — you avoid the complexity of tracking gains and losses.

Frequently Asked Questions

What is the minimum amount I can invest in a Treasury bond?

On TreasuryDirect, the minimum purchase is $100, and you can buy in $100 increments up to $5 million per auction. Through a broker, minimums vary but are often $1,000 or $5,000. Check your broker's website for their specific minimum.

Can I sell a Treasury bond before it matures?

Yes. You can sell a Treasury bond on the secondary market through a broker at any time. The price you receive depends on current interest rates and how much time remains until maturity. You will pay a broker commission to sell, typically $25 to $100.

What happens if I need my money before the bond matures?

You can sell the bond on the secondary market, but the price may be higher or lower than you paid depending on interest rate changes. If rates have risen, you may receive less than your purchase price. If rates have fallen, you may receive more. Plan to hold bonds until maturity if you need predictable access to your money.

Are Treasury bonds safe?

Treasury bonds are backed by the full faith and credit of the U.S. government, making them among the safest investments available. You will receive your interest payments and principal back as promised, assuming you hold until maturity. The main risk is that interest rates will rise, lowering the bond's price if you need to sell early.

How do I know what interest rate a Treasury bond will pay?

The Treasury announces auction results one to three business days after the auction closes. The announced rate is the "high yield" that non-competitive bidders receive. You can view past and upcoming auction results on treasurydirect.gov or your broker's website.