How to buy US Treasury bonds
How to buy US Treasury bonds is a practical question for investors who want a fixed income anchor inside a portfolio. The market behind those securities is the largest government debt market in the world, with roughly $27 trillion in marketable Treasury debt outstanding. The full faith and credit of the United States stands behind them, so they act as the reference point for mortgage rates, corporate credit, and equity valuations. Retail investors reach Treasuries in three main ways: directly from the government, through a brokerage account, or by holding a fund that owns them.
Types of Treasury securities sold to individuals
The word bond covers several instruments with different maturities and payout mechanics. Bills mature inside a year. Notes run from two to ten years. Bonds stretch to 20 or 30 years.
| Security | Maturities | Minimum purchase | Interest |
|---|---|---|---|
| Treasury bills | 4, 8, 13, 17, 26, 52 weeks | $100 | Sold at a discount |
| Treasury notes | 2, 3, 5, 7, 10 years | $100 | Fixed, paid semiannually |
| Treasury bonds | 20, 30 years | $100 | Fixed, paid semiannually |
| TIPS | 5, 10, 30 years | $100 | Semiannual, inflation adjusted |
| Floating rate notes | 2 years | $100 | Quarterly, resets weekly |
Treasury bills carry no coupon. They sell below face value, and the gap between the purchase price and the $100 paid at maturity is the return. Notes and bonds pay a fixed coupon every six months. TIPS adjust principal with the Consumer Price Index, so coupons and final redemption move with inflation. Floating rate notes reset weekly based on the 13-week bill auction.
Buying at auction through TreasuryDirect
TreasuryDirect is the government platform built for individual buyers. Accounts cost nothing to open, and there are no maintenance charges. Purchases start at $100 and scale in $100 increments. Retail orders are noncompetitive, meaning the buyer accepts whatever yield clears the auction instead of naming a price.
Auction calendars matter. Bills are offered weekly, while 10-year notes and 30-year bonds follow a monthly and quarterly rhythm. Noncompetitive bids cap at $10 million per auction. Settlement lands on the issue date, usually within days of the close, and interest arrives by direct deposit.
Buying through a broker or bank
Most large brokers let clients trade Treasuries in the secondary market. Prices appear as a percentage of par, and the buyer also covers accrued interest owed to the seller. Commissions vary: several major platforms charge nothing on Treasury trades, though a dealer markup can sit inside the quoted price. Minimums on the secondary market often start at $1,000 face value.
The tradeoff is flexibility. Brokerage holdings can sit inside an IRA, can be sold before maturity, and can share one statement with stocks or ETFs. Selling early means accepting the market price, which may be above or below what was paid.
Funds and ETFs that hold Treasuries
Exchange traded funds offer another route. TLT, SCHO, and VGIT hold baskets of Treasury securities across target maturity ranges, with expense ratios between 0.03% and 0.20%. There is no maturity date and no guaranteed return of principal. Share prices move daily with rates. Mutual funds work similarly, priced once at the close.
How to buy US Treasury bonds, step by step
- Set the holding period and match it to a maturity. A 30-year bond does not suit cash needed next year.
- Decide where the securities will live: a TreasuryDirect account, a taxable brokerage, or a retirement account.
- Open the account and link a bank for transfers. Verification can take a few business days.
- Choose the route: auction, secondary market purchase, or a fund.
- Place the order, then confirm settlement date, coupon, and yield on the trade confirmation.
Costs, minimums, and tax treatment
Cost drag comes from several places, and small differences compound over long holding periods.
- Dealer markups on secondary market trades
- Bid-ask spreads, which widen in thin trading
- Fund expense ratios, from 0.03% to 0.20%
- TreasuryDirect auctions, which carry no fees
- Reinvestment choices when a security matures
Interest from Treasuries is exempt from state and local income tax but stays subject to federal tax. Capital gains apply when a security is sold before maturity for more than its cost basis. TIPS add a wrinkle: inflation adjustments to principal are taxed in the year they occur, even though the cash arrives at maturity.
Yield, price, and interest rate risk
Bond prices and yields move in opposite directions. A 10-year note bought at par loses value if new issues carry higher coupons, and gains value if rates fall. Duration estimates that sensitivity: a 10-year note with a 4% coupon might drop roughly 8% in price when yields rise one percentage point. Investors who track US 10-year Treasury yield trends use that benchmark to judge how much rate risk sits in a portfolio.
FAQ
Can individuals buy Treasury bonds directly from the government?
Yes. TreasuryDirect lets retail accounts buy bills, notes, bonds, TIPS, and floating rate notes at auction without a broker.
What is the smallest amount required to buy a Treasury bond?
Auction purchases start at $100 and rise in $100 steps. Secondary market minimums depend on the broker and commonly start at $1,000 face value.
Are US Treasury bonds taxable?
Interest is taxed at the federal level. State and local income taxes generally do not apply, which makes Treasuries relatively efficient for residents of high tax states.
What happens if a Treasury is sold before maturity?
The sale occurs at the current market price, so the investor may receive more or less than the original cost. No penalty applies, but price risk is real.
How often do Treasury notes and bonds pay interest?
Fixed coupon securities pay every six months until maturity, when the face value is returned.