You can buy government bonds directly from the U.S. Treasury or through a bank or brokerage account
The most straightforward route is TreasuryDirect, a website run by the U.S. Department of the Treasury where you can buy bonds directly without paying a middleman fee. You create an account, link a bank account, and place an order during an auction — the Treasury holds auctions on a set schedule for different bond types. The other route is buying through a bank, brokerage firm, or investment app, which adds a fee or markup but gives you more flexibility to buy and sell bonds whenever you want, not just during Treasury auctions.
Which route makes sense depends on whether you want to hold the bond until it matures (when the government pays you back) or trade it before then. If you plan to hold it and want the lowest cost, TreasuryDirect is the right choice. If you might need to sell early or want to buy bonds that are already in circulation, a brokerage account is more practical.
Key Takeaways
- TreasuryDirect is free and lets you buy directly from the U.S. Treasury, but you can only buy during scheduled auctions and must hold bonds until maturity or wait to sell them back to the Treasury.
- Banks and brokerages let you buy bonds anytime and sell them before maturity, but they charge a fee or markup on each transaction.
- You need a bank account to fund purchases and a Social Security number or tax ID to open an account with either TreasuryDirect or a brokerage.
- Treasury auctions happen on a regular schedule — bills every week, notes every month, and bonds several times a year — and you must bid during the auction window to buy at that auction's price.
- The interest rate (called the yield) is set at auction and varies based on market conditions, so the rate you get depends on when you buy.
How to buy bonds through TreasuryDirect
Start by going to treasurydirect.gov and creating an account. You will need your Social Security number, a valid email address, and a U.S. bank account to link for funding. Once your account is set up, you can browse upcoming auctions and see the bond types available — Treasury bills (short-term, under one year), Treasury notes (two to ten years), and Treasury bonds (20 to 30 years).
When an auction you want to bid in is open, you place a noncompetitive bid, which means you agree to accept whatever interest rate the auction sets. (Competitive bidding is available but is meant for large institutional investors and requires you to specify the exact yield you will accept.) After you submit your bid, the Treasury holds the auction, sets the rate, and your account is charged on the settlement date — usually a few days after the auction closes. The bond then appears in your account, and you own it until maturity.
If you need to sell before maturity, TreasuryDirect lets you sell bonds back to the Treasury through the Sell Direct feature, but there is a $100 minimum and a small transaction fee. The price you get depends on current market interest rates, so if rates have risen since you bought, you will get less than you paid. This secondary market option exists but is less flexible than selling through a brokerage, where you have more buyers and can execute the sale when ready during market hours.
How to buy bonds through a bank or brokerage
Open an account with a bank or brokerage — firms like Fidelity, Charles Schwab, Vanguard, and most traditional banks offer bond trading. You will need to provide your Social Security number, verify your identity, and link a bank account for funding. The account setup usually takes a few business days.
Once your account is open, you can search for bonds in the platform's bond section. You can buy new bonds being auctioned (the brokerage will bid on your behalf during the Treasury auction) or buy existing bonds from other investors in the secondary market. The brokerage charges a fee per transaction — this might be a flat fee (like $10 per bond) or a percentage of the purchase price, and it varies by firm. Some brokerages offer commission-free Treasury bond trading, so compare before you open an account if cost matters to you.
The advantage of a brokerage is flexibility: you can sell your bond anytime the market is open, not just during Treasury auctions or through TreasuryDirect's Sell Direct feature. You also have access to bonds that are already in circulation, so you are not limited to waiting for the next auction date. This matters if you want to buy a specific bond type or maturity that is not currently being auctioned.
Understanding Treasury auctions and how rates are set
The Treasury holds auctions on a regular schedule. Treasury bills (4-week, 8-week, 13-week, and 26-week terms) are auctioned every week. Treasury notes (2-year, 3-year, 5-year, 7-year, and 10-year terms) are auctioned monthly. Treasury bonds (20-year and 30-year terms) are auctioned several times a year — the exact dates are posted on treasurydirect.gov.
At each auction, the Treasury announces how much it is selling and investors bid on what interest rate they are willing to accept. If you place a noncompetitive bid (the standard choice for individual investors), you are saying "I will buy at whatever rate wins the auction." The Treasury then sets the rate based on all the bids it received, and everyone who bid noncompetitively gets that same rate. The rate you receive depends entirely on market conditions at the time of that auction — if the Federal Reserve has raised rates recently, Treasury yields will be higher; if the economy is slowing, yields may be lower.
This means you cannot control the interest rate you get. If you want a specific rate, you would need to bid competitively (which requires naming the exact yield you will accept), but that is rarely practical for individual investors because if your bid is too low, it will not be accepted. Most individual investors use the noncompetitive route and accept whatever the market sets.
What happens after you buy: holding, selling, and maturity
Once you own a bond, you receive interest payments on a set schedule — usually twice a year for notes and bonds, and at maturity for bills. The interest is deposited directly into your bank account (if you bought through TreasuryDirect) or credited to your brokerage account (if you bought through a broker).
If you hold the bond until maturity, the Treasury pays you back the full face value (the amount you paid at purchase) plus any final interest payment. You do not have to do anything — it happens automatically. If you sell before maturity, the price you get depends on current market interest rates. If rates have risen since you bought, bond prices fall, so you will receive less than you paid. If rates have fallen, bond prices rise, and you will receive more than you paid.
The tax treatment is straightforward: interest from Treasury bonds is subject to federal income tax but exempt from state and local income tax. You report the interest on your federal tax return each year, even if you have not received it yet (for bills and some other bonds, interest accrues and is paid at maturity). State tax exemption can be meaningful if you live in a state with high income tax rates.
Comparing costs: TreasuryDirect versus brokerage
| Feature | TreasuryDirect | Bank or Brokerage |
|---|---|---|
| Purchase fee | None | Varies ($0 to $25+ per bond) |
| When you can buy | During scheduled auctions only | Anytime the market is open |
| Can sell before maturity | Yes, but only through Sell Direct (limited options) | Yes, anytime during market hours |
| Access to secondary market bonds | No | Yes |
| Best for | Buy-and-hold investors who want lowest cost | Active traders or those who may sell early |
If you plan to buy a bond and hold it until maturity, TreasuryDirect costs nothing and is the most economical choice. If you think you might sell before maturity, want to buy bonds that are already in circulation, or prefer the convenience of buying anytime, a brokerage account makes sense despite the fees. Some brokerages offer commission-free Treasury trading, which narrows the cost difference.
The decision often comes down to your timeline and flexibility needs. A buy-and-hold investor with a clear maturity date in mind should use TreasuryDirect. Someone who wants optionality — the ability to sell if circumstances change or to buy specific bonds outside the auction schedule — should accept the brokerage fees for that flexibility.
Common mistakes to avoid when buying government bonds
One frequent error is confusing the bond's interest rate with its current market price. When you buy a bond at auction through TreasuryDirect, you pay the face value (usually $100 per bond, though you can buy in multiples). The interest rate set at auction is locked in for the life of the bond. But if you buy an existing bond through a brokerage, the price fluctuates based on market conditions, and you might pay more or less than face value.
Another mistake is not understanding the auction schedule. If you want to buy a 10-year Treasury note and miss the monthly auction, you have to wait until the next month — you cannot buy one whenever you want through TreasuryDirect. If timing matters, a brokerage is more flexible. This is especially important if you are trying to lock in a rate before the Federal Reserve makes an announcement that might change market conditions.
A third pitfall is underestimating how much interest rates affect the value of bonds you sell early. If you buy a bond when rates are low and rates rise sharply, the bond's market value drops significantly. If you need to sell, you will take a loss. This is less of a concern if you hold to maturity, because you always get the full face value back. Understanding this risk helps you decide whether to use TreasuryDirect (which commits you to holding) or a brokerage (which gives you an exit if needed).
Frequently Asked Questions
What is the minimum amount I need to buy a Treasury bond?
Through TreasuryDirect, the minimum purchase is $100, and you can buy in $100 increments up to $5 million per auction. Through a brokerage, minimums vary by firm but are often $1,000 or $5,000 per bond. Check your brokerage's rules before opening an account.
Do I pay taxes on Treasury bond interest?
Yes, Treasury bond interest is subject to federal income tax and must be reported on your tax return. However, it is exempt from state and local income tax, which can be a significant advantage if you live in a high-tax state.
Can I lose money buying Treasury bonds?
If you hold a bond to maturity, you get back exactly what you paid (the face value) plus all interest earned, so there is no loss. If you sell before maturity, you can lose money if interest rates have risen, because bond prices fall when rates go up. The longer the bond's maturity, the bigger the price swing.
What is the difference between a Treasury bill, note, and bond?
The difference is the time until maturity. Bills mature in less than one year, notes mature in two to ten years, and bonds mature in 20 to 30 years. Longer-term bonds typically pay higher interest rates because you are lending the money for longer.
Can I buy Treasury bonds for someone else, like a child?
Through TreasuryDirect, you can only open an account in your own name using your Social Security number. You cannot open an account for a minor. Through a brokerage, you can open a custodial account for a child, which lets you manage the investments until they reach the age of majority.