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

The simplest route for most people is TreasuryDirect, a free online platform run by the U.S. Department of the Treasury. You create an account, fund it from your bank, and purchase bonds in denominations as small as $100. No broker fees, no middleman. The trade-off is that TreasuryDirect has fewer features than a brokerage — you cannot sell bonds before maturity through the platform itself, though you can transfer them to a bank or brokerage if you need to cash out early.

If you want more flexibility or already have a brokerage account, you can buy Treasury bonds through any major bank or investment firm — Fidelity, Vanguard, Charles Schwab, and others all offer them. You will pay a small commission or spread (the difference between the bid and ask price), but you gain the ability to sell whenever you want and to hold everything in one account.

A third option is to buy bonds through a traditional bank's investment department, though this is less common for individual investors and typically involves higher fees than TreasuryDirect or a discount brokerage.

Key Takeaways

  • TreasuryDirect is free and requires no broker, but you cannot sell bonds before maturity through the platform — you must transfer them elsewhere first.
  • Brokerages like Fidelity and Schwab charge a small fee but let you buy, sell, and hold bonds alongside other investments in one account.
  • You need a bank account to fund purchases and a Social Security number or tax ID to open any account.
  • Treasury bonds come in different maturity lengths — 20 years and 30 years are the longest — and the interest rate is set at auction, not by you.
  • Interest payments arrive twice a year, and you owe federal income tax on that interest but not state or local tax.

Setting up a TreasuryDirect account

Go to treasurydirect.gov and click "Open an Account." You will need your Social Security number, a valid email address, and a U.S. bank account. The site will verify your identity by asking questions about your credit history — this takes a few minutes and happens instantly.

Once your account is open, you link your bank account for funding. TreasuryDirect uses ACH transfers, which are free and typically take one to three business days. You do not need to keep a minimum balance in your TreasuryDirect account; money sits there until you use it to bid on bonds.

After your bank account is linked, you are ready to purchase. TreasuryDirect holds auctions on a regular schedule — Treasury bills every week, notes every month, and bonds every few months. The auction dates and times are posted on the website well in advance.

How to place a bid in a TreasuryDirect auction

When an auction opens, you log into your account and select the security you want to buy. You choose a quantity (in $100 increments) and decide whether to bid competitively or non-competitively. Most individual investors use the non-competitive bid, which means you accept whatever interest rate the auction sets. This guarantees you will receive the bonds you want at that rate.

A competitive bid means you name the price or yield you are willing to pay. If your bid is too low, you may not receive any bonds. Competitive bidding is mainly used by large institutional investors and is rarely worth the complexity for individuals.

You submit your bid before the auction closes. The Treasury holds the auction, sets the interest rate based on demand, and then credits the bonds to your account. The entire process from bid to settlement takes a few business days. Your first interest payment arrives on the bond's first coupon date, which is printed on your bond certificate.

Buying bonds through a brokerage account

If you already have an account at Fidelity, Vanguard, Schwab, or another firm, you can buy Treasury bonds the same way you buy stocks — through the trading platform. Search for the bond by its maturity date or CUSIP number (a unique identifier), enter the quantity, and place the order.

Brokerages show you the bid-ask spread upfront, so you know exactly what you are paying. For a $10,000 bond, the spread might be $5 to $20 depending on market conditions and the specific bond. This is your only cost; there is no separate commission.

The advantage of buying through a brokerage is liquidity. If you need cash before the bond matures, you can sell it immediately at the current market price. The price will be higher or lower than what you paid depending on interest rates — if rates have fallen since you bought, your bond is worth more, and vice versa. TreasuryDirect does not offer this flexibility without transferring the bond out first.

Understanding maturity dates and interest rates

Treasury bonds are issued with fixed maturity dates. The most common are 20-year and 30-year bonds, though the Treasury also issues 10-year notes and shorter-term securities. The maturity date is when the Treasury pays back your principal in full.

The interest rate — called the coupon rate — is set at auction and does not change. If you buy a 30-year bond with a 4% coupon, you receive 2% of your principal twice a year for 30 years, regardless of what happens to market rates. This predictability is one reason people buy bonds: you know exactly what you will receive.

Longer-maturity bonds typically offer higher interest rates than shorter ones, because you are lending money for a longer period and taking on more risk that inflation or other factors will erode the value of that money. A 30-year bond will usually pay more than a 10-year bond, all else equal.

Tax treatment of Treasury bond interest

Interest you earn on Treasury bonds is subject to federal income tax. You report it on your tax return each year, and it counts as ordinary income at your regular tax rate.

The key advantage is that Treasury bond interest is not subject to state or local income tax, even if you live in a state with high income taxes. This can make Treasuries more attractive than corporate bonds or savings accounts in high-tax states.

You do not owe tax on any gain in the bond's price if you sell it before maturity — only on the interest payments themselves. If you buy a bond at a discount (below par) and sell it at a higher price, that gain is treated as a capital gain, which may be taxed at a lower rate than ordinary income depending on how long you held it.

What happens if you need to sell before maturity

If you hold the bond through maturity, you get your full principal back. If you need to sell earlier, you can do so through a brokerage or by transferring your TreasuryDirect bond to a brokerage and selling it there.

The price you receive depends on current market interest rates. If rates have risen since you bought the bond, the price will be lower — buyers want a discount to compensate for the lower coupon rate. If rates have fallen, the price will be higher. This is why longer-maturity bonds are more sensitive to interest rate changes: a 30-year bond's price swings more than a 10-year bond's when rates move.

Selling before maturity also means you may incur a small transaction fee at a brokerage, though many firms waive fees for Treasury sales. Check your brokerage's fee schedule before you sell.

Frequently Asked Questions

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

Yes. TreasuryDirect lets you buy bonds in $100 increments, so you can start with as little as $100. Brokerages typically have no minimum either, though some require a minimum account balance to open the account itself — usually $1,000 to $2,500. Check your chosen firm's requirements.

What is the difference between a Treasury bond, note, and bill?

They are all debt issued by the U.S. Treasury, but they differ by maturity. Bills mature in one year or less, notes mature in 2 to 10 years, and bonds mature in 20 or 30 years. The longer the maturity, the higher the interest rate typically is. All three are bought the same way through TreasuryDirect or a brokerage.

Do I have to hold the bond until it matures?

No. You can sell a Treasury bond anytime through a brokerage. If you sell before maturity, you receive the current market price, which may be higher or lower than what you paid. TreasuryDirect does not let you sell directly, but you can transfer the bond to a brokerage and sell it there.

What if interest rates go up after I buy a bond?

If you hold the bond to maturity, it does not matter — you still receive the coupon rate you locked in. If you need to sell before maturity, a higher interest rate environment means the bond's price will be lower, because new bonds offer better rates. This is the trade-off of owning a fixed-rate bond in a rising-rate environment.

Are Treasury bonds safe?

Treasury bonds are backed by the U.S. government's ability to tax and print currency, making them among the safest investments available. The risk is not default but inflation — if inflation rises, the fixed interest you receive becomes worth less in real terms. There is also interest rate risk if you sell before maturity and rates have risen.