You can buy Treasury bonds two ways: directly from the U.S. government through a TreasuryDirect account, or through a bank, broker, or dealer. Either path lets you pick up a 20-year or 30-year bond at the next auction in $100 increments, with a $100 minimum and a $10 million ceiling per auction. Here is how to buy Treasury bonds, what each path gives you, and what to think about before you commit money for two or three decades.
What You’re Actually Buying
A Treasury bond is long-term federal debt with a 20-year or 30-year term.1TreasuryDirect. Treasury Bonds The interest rate is fixed at auction and paid every six months for the life of the bond. At maturity, you get the face value back. Because the federal government backs the payments, default risk is essentially zero, which is the whole appeal.
The trade-off is a long commitment and modest returns. If you want your money back before the term ends, you have to sell on the secondary market at whatever price it will fetch, and that price moves with interest rates.
Buying Through TreasuryDirect
TreasuryDirect is the government’s own online platform. To open an individual account you need a Social Security Number, a U.S. address, an email address, and a checking or savings account (you’ll enter the routing and account numbers).2TreasuryDirect. Open an Account The sign-up is online and takes a few minutes. The rules governing how securities are held and transferred inside the system sit in 31 C.F.R. Part 363.3eCFR. 31 CFR Part 363 – Regulations Governing Securities Held in TreasuryDirect
Once your account is open, log in, pick the BuyDirect tab, and choose the bond term and dollar amount.4TreasuryDirect. Buying a Treasury Marketable Security The minimum is $100 and you buy in $100 increments, up to $10 million per auction.1TreasuryDirect. Treasury Bonds TreasuryDirect only accepts non-competitive bids, which means you agree to accept whatever yield the auction produces.5TreasuryDirect. Treasury Auction Rules The upside is that your order is guaranteed to be filled. After the auction settles, the Treasury pulls the money from your linked bank account and the bond shows up in your TreasuryDirect holdings.
If you want to stage cash in advance of an auction, you can park funds in a zero-percent certificate of indebtedness inside your account. It earns no interest and rolls over daily until you use it to buy a security.6eCFR. 31 CFR 363.131 – What Is a TreasuryDirect Zero-Percent Certificate of Indebtedness
Buying Through a Bank, Broker, or Dealer
A brokerage account gets you two things TreasuryDirect won’t: competitive bidding and access to the secondary market.4TreasuryDirect. Buying a Treasury Marketable Security A competitive bid lets you specify the yield you want. If the auction clears at or above your yield, you get the bonds; if not, you get nothing. That matters mainly to institutional buyers and investors with a firm view on where rates are going.
The secondary market is often the more useful feature. Through a broker you can buy an existing Treasury bond from another investor at the current market price instead of waiting for the next auction, which is how you’d target a specific maturity date or coupon rate that isn’t on the auction calendar. Brokers also sell STRIPS, which split a Treasury bond’s interest payments and principal into separate zero-coupon securities trading at a discount.7TreasuryDirect. History of Separate Trading of Registered Interest and Principal of Securities STRIPS are not sold through TreasuryDirect.
When Treasury Bond Auctions Happen
New 20-year and 30-year bonds are issued as initial offerings quarterly, in February, May, August, and November. In the other eight months of the year, the Treasury reopens existing issues, so there’s an auction opportunity for both terms almost every month.8TreasuryDirect. When Auctions Happen (Schedules)
The 30-year auction typically falls in the second week of the month, with the bond issued on the 15th. The 20-year auction is the next-to-last Wednesday of the month, with issuance on the last calendar day. Upcoming auctions are announced in the first half of each month, so you’ll have time to prepare your bid.
Selling a Treasury Bond Before It Matures
TreasuryDirect will not let you sell to another investor directly. To get out early, you have to transfer the bond out of TreasuryDirect and into a brokerage account, and then your broker sells it on the secondary market. This catches a lot of first-time buyers off guard.
The transfer runs through the Manage Direct tab: pick the bond, choose External Transfer, and complete FS Form 5511, which asks for your broker’s wire name, routing number, and the destination account.9TreasuryDirect. Transferring From One System To Another Get that information from your broker before you start. Once the transfer lands, the bond trades like any other security.
What you’ll get for it depends on where interest rates are at the time of sale. If rates have risen since you bought, your bond’s lower coupon makes it less attractive and the price falls below face value. If rates have fallen, the above-market coupon pushes the price above face value. Hold to maturity and none of this matters: you collect every scheduled payment and get the full face value back.10U.S. Securities and Exchange Commission. Interest Rate Risk – When Interest Rates Go Up, Prices of Fixed-Rate Bonds Fall The transfer and sale add several days of delay, so don’t expect same-day cash.
Taxes You’ll Owe
Treasury bond interest is federally taxable as ordinary income. You’ll get a Form 1099-INT each year with the interest amount in box 3 and report it on your federal return.11IRS. Publication 550 – Investment Income and Expenses The face value you receive at maturity is not taxable; it’s just your original investment coming back.
The upside is that Treasury bond interest is exempt from state and local income taxes under federal law.12Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation States can still impose estate or inheritance tax, and they can levy nondiscriminatory franchise taxes on corporations, but for an individual holder in a high-tax state the exemption is real money.13eCFR. 31 CFR 356.32 – What Tax Rules Apply If you sell before maturity, the difference between sale price and purchase price is a capital gain or loss, long-term if you held more than a year.14Office of the Law Revision Counsel. 26 USC Subchapter P – Capital Gains and Losses
What Happens When the Bond Matures
At the end of the 20- or 30-year term, the Treasury redeems the bond and sends the face value to your linked bank account.11IRS. Publication 550 – Investment Income and Expenses You can also schedule reinvestment, either at the time you buy or later, so the proceeds roll into a new bond of the same type and term at the next auction without any action from you.15TreasuryDirect. Reinvest Marketables You can edit or cancel the schedule at any time. With no reinvestment set up, the money just goes to your bank.
Risks Worth Weighing Before You Buy
Default risk is near zero, but two other risks hit long-term bonds hard. The first is interest rate risk: bond prices move opposite to rates, and a 30-year bond is far more sensitive to rate swings than a short-term note because there are decades of locked-in payments at stake.10U.S. Securities and Exchange Commission. Interest Rate Risk – When Interest Rates Go Up, Prices of Fixed-Rate Bonds Fall This only bites if you sell early.
The second is inflation. A $500 semiannual coupon buys less in 20 years if prices keep rising. A 3% coupon against 4% inflation is a negative real return for every year you hold. If that scenario worries you, Treasury Inflation-Protected Securities (TIPS) adjust principal to the Consumer Price Index and are a common pairing with fixed-rate Treasuries.
Buying for a Child or Through a Trust
A child under 18 can’t open their own TreasuryDirect account, but a parent or someone providing the child’s primary financial support can set up a minor’s account as custodian and buy bonds in the child’s name and Social Security Number.16eCFR. 31 CFR 363.27 – Regulations Governing Securities Held in TreasuryDirect The custodian needs their own TreasuryDirect account first; the minor’s account links to it. When the child turns 18, they need to open their own primary account and have the securities transferred over. A lot of accounts sit in limbo because that handoff never happens.
If you want Treasury bonds held in a revocable living trust or other entity, TreasuryDirect has entity accounts. You’ll need a Taxpayer Identification Number for the entity, a U.S. address, a linked bank account, and authority to act as its account manager.17TreasuryDirect. Open an Account – Entity For individual accounts, a simpler option is to name a beneficiary when you register the bond, which creates a payable-on-death arrangement so the bond passes to that person outside your estate.18TreasuryDirect. Registering Your Savings Bonds The beneficiary must be an individual, not an entity, and has no access while you’re alive.