You can buy government bonds directly from the U.S. Treasury or through a bank or brokerage

The most straightforward route is TreasuryDirect, a free online platform run by the U.S. Department of the Treasury. You create an account, link a bank account, and purchase bonds directly without paying a middleman fee. This works for Treasury bills (short-term), Treasury notes (medium-term), and Treasury bonds (long-term). The minimum purchase is $100, and you can buy in $100 increments after that.

If you prefer working with a financial institution, you can buy Treasury bonds through a bank, credit union, or brokerage firm. These intermediaries charge a fee or markup, but some people find the process simpler or want to hold bonds alongside other investments in one account. Your bank can walk you through their specific process.

A third option is buying bonds on the secondary market — meaning bonds that other investors are selling. This happens through brokerages and typically involves higher fees, but it lets you buy bonds that are no longer being issued by the Treasury.

Key Takeaways

  • TreasuryDirect is free and requires only an online account linked to your bank, with a $100 minimum purchase.
  • Treasury bills mature in one year or less, Treasury notes in two to ten years, and Treasury bonds in twenty to thirty years.
  • You can hold bonds until they mature and get your full principal back, or sell them before maturity on the secondary market.
  • Interest rates and bond prices move in opposite directions, so the value of your bond can change if you need to sell before maturity.

Setting up a TreasuryDirect account

Go to treasurydirect.gov and select "Open an Account." You will need a Social Security number, email address, and a U.S. bank account. The site will verify your identity through your bank login — you do not hand over your password, but you do authorize TreasuryDirect to confirm you are who you say you are.

Once your account is open, you link a checking or savings account for purchases and for receiving interest payments. TreasuryDirect makes small test deposits to confirm the account is real, then you can begin buying. The entire setup takes about fifteen minutes.

You can manage your account online anytime — view your holdings, see maturity dates, and set up reinvestment if you want interest payments automatically rolled into new bonds.

Choosing which type of Treasury bond to buy

Treasury bills (T-bills) mature in four weeks, thirteen weeks, twenty-six weeks, or fifty-two weeks. You buy them at a discount — meaning you pay less than the face value — and receive the full face value when they mature. The difference is your interest. T-bills are the safest option because the wait is short, but the interest rate is typically lower.

Treasury notes (T-notes) come in two, three, five, seven, and ten-year terms. You pay the full face value upfront and receive interest payments every six months until maturity. These offer higher interest rates than T-bills because you are lending money for longer.

Treasury bonds (T-bonds) have twenty or thirty-year terms. They work the same way as notes — you pay face value and collect interest twice a year — but the longer timeline means higher interest rates and more risk if you need to sell before maturity. If interest rates rise after you buy, the value of your bond drops because new bonds will offer better rates.

Understanding auction dates and interest rates

The Treasury holds auctions on a regular schedule. T-bills auction weekly, T-notes auction monthly, and T-bonds auction quarterly. On TreasuryDirect, you can see upcoming auction dates and the current interest rate (called the "discount rate" for bills and the "coupon rate" for notes and bonds).

You do not negotiate the rate — the Treasury sets it based on demand at auction. If you place an order before the auction closes, you are bidding to buy at whatever rate the auction produces. This is called a "noncompetitive bid" and is the standard route for individual investors. You are may provide to get your bonds at the auction rate, whatever it turns out to be.

Interest rates change with economic conditions and Federal Reserve policy. If rates are rising, newly issued bonds will pay more than older ones. If you own a bond paying 3 percent and new bonds are paying 5 percent, your bond is worth less on the secondary market because buyers would rather have the higher rate.

What happens when your bond matures

On the maturity date, TreasuryDirect deposits the full face value into your linked bank account. If you own a $1,000 bond, you get $1,000 back. You also receive any final interest payment owed.

Before maturity arrives, you can set up reinvestment instructions so the money automatically rolls into a new bond purchase. This is useful if you want to keep money in Treasuries without having to manually buy again. You choose which type of bond (bill, note, or bond) and the term, and TreasuryDirect handles the rest.

If you do not set up reinvestment and do not withdraw the money, it sits in your TreasuryDirect account as a cash balance. You can then use it to buy new bonds whenever you choose.

Selling a bond before it matures

You can sell Treasury bonds before maturity, but you must do so through a bank or brokerage — TreasuryDirect does not have a secondary market. When you sell, the price depends on current interest rates. If rates have risen since you bought, your bond is worth less because new bonds pay more. If rates have fallen, your bond is worth more.

Selling also means paying a transaction fee to the bank or brokerage handling the sale. These fees vary but typically range from $25 to $50. For this reason, selling early makes most sense if you need the money or if interest rates have dropped significantly and you want to lock in a gain.

Most individual investors buy Treasuries to hold until maturity, which avoids the secondary market entirely and eliminates the need to worry about price fluctuations.

Tax treatment of Treasury bond interest

Interest you earn on Treasury bonds is subject to federal income tax but exempt from state and local income tax. This is a real advantage if you live in a high-tax state. When you file your federal return, you report the interest as ordinary income.

If you sell a bond before maturity and make a gain (sell it for more than you paid), that gain is also subject to federal tax. If you sell at a loss, you can deduct the loss against other capital gains.

TreasuryDirect sends you a 1099-INT form each January showing the interest you earned in the prior year. Keep this with your tax records.

Frequently Asked Questions

Can I buy Treasury bonds if I do not have much money to start?

Yes. TreasuryDirect has a $100 minimum, and you can add $100 at a time. You can also buy just one T-bill or note if you want to start small and add more later. There is no account fee or maintenance charge.

What is the difference between buying at auction and buying on the secondary market?

At auction through TreasuryDirect, you get the bond at the official rate with no fee. On the secondary market through a broker, you pay a markup or commission and the price depends on what other investors are willing to pay. Auction purchases are simpler and cheaper for most people.

Do I lose money if interest rates go up after I buy?

Only if you sell before maturity. If you hold the bond until it matures, you get your full principal back regardless of what happened to interest rates. If you need to sell early, rising rates mean your bond is worth less on the secondary market.

Can I use Treasury bonds as collateral for a loan?

Yes, but the process depends on your bank or lender. Some banks will lend against Treasury bonds you hold with them. TreasuryDirect bonds can sometimes be pledged as collateral, but you will need to ask your lender about their specific rules.

What happens if the U.S. government defaults?

Treasury bonds are backed by the full faith and credit of the U.S. government. Default is considered extremely unlikely, which is why Treasuries are treated as the safest investment available. However, no investment is risk-free, and you should understand that possibility before investing any money you cannot afford to lose.