You can buy government bonds directly from the U.S. Treasury, through a bank, or through a brokerage firm
The route you choose depends on whether you want to buy new bonds at auction, buy existing bonds on the secondary market, or prefer a financial institution to handle the purchase. The Treasury sells new bonds directly to the public with no fees. Banks and brokers charge commissions but offer more flexibility in timing and selection. Each path has different minimum purchase amounts, fees, and the types of bonds available.
Your decision also depends on what you plan to do with the bond after you buy it. If you want to hold it until maturity and never sell, TreasuryDirect is the cheapest option. If you think you might sell before maturity or want to buy bonds that are not currently being auctioned, you will need a bank or broker.
Key Takeaways
- TreasuryDirect is the Treasury's website where you can buy new Treasury bills, notes, and bonds directly at auction with no purchase fees.
- Banks and brokers can sell you both new Treasury bonds and existing bonds trading on the secondary market, but they charge commissions or markups.
- New bonds from the Treasury have minimum purchases of $100, while secondary market purchases through brokers may have different minimums depending on the firm.
- TreasuryDirect requires you to set up an account online and link a bank account; purchases happen at scheduled auctions throughout the year.
- If you want to sell a bond before maturity, you must use a broker or bank, since TreasuryDirect does not offer a resale platform.
Buying directly from the Treasury through TreasuryDirect
TreasuryDirect is the official online platform run by the U.S. Department of the Treasury. You create an account, link your bank account, and bid on new Treasury securities at regularly scheduled auctions. The minimum purchase is $100, and you pay no fees or commissions. The Treasury accepts your bid at the auction price, and the bond is deposited into your TreasuryDirect account.
Auctions happen on a fixed schedule: Treasury bills are auctioned weekly, Treasury notes are auctioned monthly, and Treasury bonds are auctioned quarterly. You can place a bid up to the day before the auction closes. After the auction, the Treasury credits your account and you own the bond. You can hold it until maturity in your TreasuryDirect account, or you can transfer it to a brokerage account if you want to sell it before maturity.
The main limitation of TreasuryDirect is that you can only buy new bonds at auction. You cannot buy existing bonds that are already trading, and you cannot sell bonds directly through the platform. If you want to buy a bond that was issued years ago or sell one before it matures, you need to use a bank or broker.
Buying through banks and brokers
Banks and brokerage firms can sell you both new Treasury bonds and existing bonds trading on the secondary market. When you buy a new bond through a bank or broker, they place your order in the Treasury auction on your behalf and charge a commission. When you buy an existing bond, you pay the current market price plus a markup or commission.
The advantage of using a bank or broker is flexibility. You can buy bonds at any time, not just during auction windows. You can choose from bonds with different maturity dates and yields. You can also sell bonds before maturity through the same institution. The disadvantage is cost: commissions and markups reduce your return. A typical commission on a new Treasury bond purchase ranges from $25 to $100 depending on the firm, though some brokers charge a flat fee per trade or a percentage of the purchase amount.
Minimum purchase amounts vary by institution. Some brokers allow purchases as low as $100, while others require $1,000 or more. Call or check the firm's website to confirm their minimums and fee structure before you open an account.
Understanding the difference between new and secondary market bonds
New bonds are issued by the Treasury at scheduled auctions. They carry the current interest rate set by the auction. When you buy a new bond, you pay the face value (or par value) of $100 per bond, plus any accrued interest if the auction has already started.
Secondary market bonds are existing bonds that were issued in the past and are now being resold by other investors. Their price fluctuates based on interest rates and demand. If interest rates have risen since the bond was issued, the bond's price falls below par. If interest rates have fallen, the price rises above par. You can only buy secondary market bonds through a bank or broker, not through TreasuryDirect.
For most individual investors, buying new bonds through TreasuryDirect is simpler and cheaper. Secondary market purchases make sense if you want a bond with a specific maturity date that is not currently being auctioned, or if you want to buy before the next auction date.
Setting up a TreasuryDirect account
Go to treasurydirect.gov and click "Open an Account." You will need a Social Security number or tax ID, a valid email address, and a U.S. bank account. The Treasury verifies your identity using information from your credit file. This process is when ready in most cases, though it can take up to two business days.
Once your account is open, you link your bank account for funding and receiving payments. You can then place bids in upcoming auctions. The Treasury withdraws the purchase amount from your bank account on the settlement date (usually a few days after the auction) and deposits the bond into your TreasuryDirect account. When the bond matures, the principal and final interest payment are deposited back into your linked bank account.
Comparing costs: TreasuryDirect versus banks and brokers
The cost difference between these three routes depends on what you are buying and how long you hold it. TreasuryDirect has no fees but only sells new bonds at scheduled auctions. Banks and brokers charge fees but offer more options and flexibility.
| Purchase Route | Minimum Purchase | Fees | New Bonds Available | Secondary Market Available |
|---|---|---|---|---|
| TreasuryDirect | $100 | None | Yes | No |
| Bank | Varies ($100–$5,000) | $25–$100 per trade | Yes | Yes |
| Brokerage firm | Varies ($100–$1,000) | $0–$100 per trade or percentage-based | Yes | Yes |
If you are buying a new Treasury bond and holding it to maturity, TreasuryDirect saves you money. You pay no fees and can start with $100. If you want to buy secondary market bonds, sell before maturity, or need more flexibility in timing, a bank or broker is necessary, and you will pay a commission or markup. Some online brokers offer lower commissions than traditional banks, so compare rates before opening an account.
What happens after you buy a bond
Once you own a Treasury bond, you receive interest payments twice a year. If you bought through TreasuryDirect, the interest is deposited into your linked bank account. If you bought through a bank or broker, the interest is credited to your brokerage account or bank account, depending on where you hold the bond.
When the bond matures, you receive the full face value back. If you want to sell the bond before maturity, you must use a bank or broker to list it on the secondary market. The price you receive depends on current interest rates and market demand. TreasuryDirect does not offer a resale service, so you would need to transfer the bond to a brokerage account first, which can take a few business days.
Frequently Asked Questions
Can I buy Treasury bonds through my regular bank account?
Yes. Most banks offer Treasury bond sales through their investment or brokerage divisions. You may need to open a separate brokerage account with the bank or use their online platform. Call your bank's investment department to ask about their Treasury offerings, minimum purchases, and fees.
What is the difference between a Treasury bill, note, and bond?
Treasury bills mature in one year or less, Treasury notes mature in 2 to 10 years, and Treasury bonds mature in 20 or 30 years. All three are sold at auction and can be bought through TreasuryDirect or a bank or broker. The longer the maturity, the higher the interest rate is typically offered.
Do I have to hold a Treasury bond until maturity?
No. You can sell a Treasury bond on the secondary market at any time through a bank or broker. The price you receive depends on current interest rates. If rates have risen, you may receive less than you paid. If rates have fallen, you may receive more. TreasuryDirect does not allow direct sales, but you can transfer your bond to a brokerage account and sell it there.
Are there any taxes on Treasury bond interest?
Yes. Interest from Treasury bonds is subject to federal income tax but is exempt from state and local income taxes. You will receive a Form 1099-INT from the Treasury or your broker showing the interest you earned, which you report on your federal tax return.
What if I want to buy a Treasury bond but the next auction is months away?
You can buy an existing Treasury bond on the secondary market through a bank or broker at any time. The price will reflect current interest rates and may be higher or lower than the original issue price. This option costs more in fees but gives you when ready access to bonds with the maturity date you want.