To buy a bond, you open one of two kinds of account, fund it from your bank, pick the specific bond you want, and place an order for a face amount. Treasury securities can be bought straight from the government at TreasuryDirect.gov for as little as $25 for savings bonds or $100 for marketable Treasuries. Corporate and municipal bonds require a brokerage account and usually start at $1,000 per bond. The steps are more involved than buying a stock, but each one is routine once you know what the platform is asking for.
First Decision: TreasuryDirect or a Brokerage
Where you buy shapes everything that follows, so settle this before you do anything else.
TreasuryDirect is the U.S. Treasury’s own platform. It sells Treasury bills, notes, bonds, TIPS, and Series I and EE savings bonds directly to you, with no commissions and no middleman. Purchases and interest payments move through a bank account you link to the site. The limit is that it only sells Treasuries, and if you want to sell before maturity you have to transfer the security to a broker first.
A brokerage account at a firm like Fidelity, Schwab, or Vanguard gives you Treasuries plus corporate bonds, municipal bonds, and bond funds. New-issue Treasuries are usually commission-free; secondary-market corporate and municipal trades carry a small per-bond fee. Because the bond already lives in a brokerage system wired into the secondary market, selling early is far easier than from TreasuryDirect.
If Treasuries are all you want and you plan to hold to maturity, TreasuryDirect is the cleanest option. For anything else, or if you want flexibility to sell, start with a brokerage.
What You Need to Open and Fund the Account
Both account types require a Social Security Number or Taxpayer Identification Number, which federal law mandates for reporting any interest income you earn.1Internal Revenue Service. U.S. Taxpayer Identification Number Requirement You’ll go through identity verification under anti-money-laundering rules, which means supplying your legal name, date of birth, and address.
For TreasuryDirect, the online application also asks for your bank’s nine-digit routing number and your account number. Treasury verifies your identity and emails your account number once the application clears.2eCFR. Part 363 Regulations Governing Securities Held in TreasuryDirect That linked bank account becomes the two-way pipe for purchases and interest, moving money through the Automated Clearing House system.
Brokerage applications cover the same identity ground and add questions about your investment experience, income, and risk tolerance to meet suitability rules. Once the account is approved, you move cash from your bank into the brokerage account so it’s sitting there when you place your first order.
Minimums for Each Bond Type
Order sizes vary by security, and mismatching your amount with the minimum is the most common reason a first order fails to go through.
- Treasury bills, notes, bonds, and TIPS: $100 minimum, in $100 increments, whether you buy through TreasuryDirect or a brokerage.3TreasuryDirect. Treasury Bonds
- Series I and EE savings bonds: $25 minimum for electronic bonds, with an annual cap of $10,000 per person per series. Available only through TreasuryDirect.4TreasuryDirect. Savings Bonds: About
- Corporate and municipal bonds: typically $1,000 face value per bond, and most brokerages let you buy as few as one bond. Some issues set a higher minimum, so confirm before you order.
The $10,000 savings bond cap runs per person per series per calendar year, so you can buy $10,000 of Series I and $10,000 of Series EE in the same year. Marketable Treasuries, corporate bonds, and municipal bonds have no comparable annual cap.
Finding the Specific Bond You Want
Every bond carries a nine-character identifier called a CUSIP number, assigned by the Committee on Uniform Securities Identification Procedures.5Municipal Securities Rulemaking Board. About CUSIP Numbers A single large issuer can have dozens of outstanding bonds with different coupons and maturity dates, so the CUSIP is how you confirm you’re looking at the exact one you mean to buy.
Three other numbers tell you what you’re actually getting:
- Coupon rate: the annual interest rate as a percentage of face value. A 5% coupon on a $1,000 bond pays $50 a year, usually as two $25 installments six months apart.6Fidelity Investments. Corporate Bonds
- Maturity date: when the issuer returns your principal. Anywhere from a few weeks for a Treasury bill to 30 years for a long bond.
- Price: bonds trade at par ($1,000 face value), at a premium above par, or at a discount below par. A bond quoted at 102 costs $1,020 per $1,000 of face value. Price relative to par is what pushes your actual yield above or below the stated coupon.
Most brokerage platforms let you search by issuer, maturity range, credit rating, or yield, and you can enter a CUSIP directly if you already know which bond you want. TreasuryDirect works differently: you select the security type and term, because the platform only sells new-issue Treasuries at auction.
Placing the Order
On TreasuryDirect
Log in and open the BuyDirect function, then pick the security you want.2eCFR. Part 363 Regulations Governing Securities Held in TreasuryDirect Enter the purchase amount, choose which linked bank account to debit, and review the summary showing the total cost and the scheduled withdrawal date. For marketable Treasuries, you’re placing a noncompetitive bid at the next auction, which means you accept whatever yield the auction sets. Your bank account is debited on the issue date.
Savings bonds skip the auction entirely. Pick a dollar amount between $25 and $10,000, and the bond is issued to your account immediately at face value.
On a Brokerage
Brokerages handle both new issues and secondary-market bonds. For a new issue, you select the upcoming auction or offering, enter the face value you want, and submit. For a secondary-market bond, you’re buying from another investor and the process resembles a stock trade.
On the secondary market, choose between a market order, which fills at the current asking price, and a limit order, which caps the price you’re willing to pay. Limit orders are usually the safer choice, because bond prices can shift between the quote you see and the moment your order executes. Enter the face value or the number of bonds you want, confirm the details, and submit. Once confirmed, the order binds you.
What You’ll Actually Pay
Two costs sit on top of the quoted price, and both show up on your trade confirmation.
The first is accrued interest. If you buy between coupon dates, you owe the seller interest for the days they held the bond since the last payment. You get that money back at the next coupon when the full payment lands in your account, but it increases the cash you need at settlement. Your brokerage calculates it automatically and lists it as a separate line.
The second is the dealer’s cut. Bond dealers typically build their compensation into the price as a markup when you buy or a markdown when you sell, rather than charging a visible commission. That’s why the same bond can show slightly different prices at different brokerages. Some brokerages also add a flat per-bond fee. For Treasuries bought at auction through a brokerage, there’s often no fee at all.
Settlement and Confirmation
Submitting an order doesn’t transfer ownership right away. Most bond trades now settle on a T+1 basis, meaning the actual exchange of securities and cash happens one business day after the trade. The SEC shortened the standard settlement cycle from T+2 to T+1 effective May 28, 2024.7U.S. Securities and Exchange Commission. Shortening the Securities Transaction Settlement Cycle
A trade confirmation will arrive by email or in your account’s message center, showing the final price, any accrued interest, the settlement date, and the total cost. Your bond is held in book-entry form, which means it exists as an electronic record rather than a paper certificate.8U.S. Securities and Exchange Commission. Book Entry Save the confirmation for your tax records.
A Short Risk Check Before You Commit
Bonds are usually safer than stocks, but they are not risk-free, and a few features of the bond you’re about to buy are worth checking before you click submit.
Interest rate risk. When rates rise, existing bond prices fall, because nobody wants to buy your 3% bond at face value when new bonds pay 5%. A bond’s sensitivity to this is measured by its duration: a bond with a duration of 7 loses roughly 7% of its market value if rates rise by one percentage point. Longer-maturity bonds have higher duration. If you plan to hold to maturity, the price swings in between don’t change what you receive. If you might need to sell early, duration matters a lot.
Credit risk. This is the chance that the issuer can’t make interest payments or return your principal. S&P and Moody’s publish letter ratings; BBB- (S&P) or Baa3 (Moody’s) and above is investment grade, and anything below is high-yield or junk, paying more to compensate for a higher default risk. Treasuries carry no meaningful credit risk because they’re backed by the federal government, which is why their yields sit below comparable corporates.
Inflation risk. A fixed coupon buys less over time if prices rise faster than your yield. TIPS address this by adjusting their principal with the Consumer Price Index, and you can buy them through TreasuryDirect or a brokerage with the same $100 minimum.9TreasuryDirect. Treasury Inflation-Protected Securities (TIPS)
Call risk. Many corporate and municipal bonds let the issuer redeem the bond before maturity, usually after a set number of years. Issuers call when rates have fallen, which is the worst moment for you to reinvest. Callable bonds generally offer higher yields to make up for that risk.10Investor.gov. Callable or Redeemable Bonds Before buying, check whether the bond is callable, note the earliest call date, and look at the yield-to-call alongside the yield-to-maturity.
One tax point can swing your choice: interest on bonds issued by state and local governments is generally excluded from federal income tax under 26 U.S.C. ยง 103, and often from state tax too if the bond was issued in your state.11Office of the Law Revision Counsel. 26 U.S. Code 103 – Interest on State and Local Bonds A 3.5% municipal bond can net more than a 4.5% corporate bond, depending on your bracket.
If You Might Sell Before Maturity
You aren’t locked in. Through a brokerage, selling works much like selling a stock: you place a sell order, a dealer buys the bond from you, and proceeds post after settlement. The price depends on current rates, remaining term, and the issuer’s credit quality. Rates up since you bought generally means selling at a loss; rates down generally means a premium. Dealers take their cut as a markdown on the sale price, and smaller trade sizes, sometimes called odd lots and generally under $100,000 in face value, tend to receive less favorable pricing than larger blocks.12Municipal Securities Rulemaking Board. What to Expect When Selling Municipal Bonds Before Maturity
A bond held in TreasuryDirect can’t be sold on the secondary market from the Treasury’s platform. You have to transfer it to a bank or broker first, you can’t transfer within 45 days of the original issue date, and the transfer request needs to arrive at least 10 business days before the next interest or principal payment to guarantee processing.13TreasuryDirect. Selling a Treasury Marketable Security If there’s any real chance you’ll want to sell early, buying through a brokerage from the start spares you the detour.