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How to Buy US Treasury Bonds Directly

Understanding the difference between coupon interest and price gains is a good place to start before buying a US Treasury security directly.

What a US Treasury security is

Treasury securities are debt issued by the US federal government, split by maturity into short-term T-Bills (one year or less), medium-term T-Notes (2-10 years), and long-term T-Bonds (20-30 years). Because the US government backs them, they are widely treated as one of the lowest-default-risk assets available and are commonly used as a safe-asset building block in a portfolio.

Two main ways to buy them directly

A US person can buy new-issue Treasuries directly through TreasuryDirect.gov, the US Treasury's own platform, with a minimum purchase as low as $100 in $100 increments and no brokerage commission. An investor outside the US -- or a US investor who wants to trade an existing bond before maturity -- typically buys or sells through a brokerage account instead, since TreasuryDirect does not support international bank accounts or secondary-market sales.

Coupon interest vs a price gain from selling early

Most Treasuries pay a fixed coupon twice a year, which counts as ordinary interest income. If you instead buy on the secondary market below face value and sell before maturity at a higher price, that difference is generally treated as a capital gain rather than interest -- though the exact category and rate depend on your own country's tax rules, so check current guidance rather than assuming a specific treatment.

Zero-coupon Treasuries (STRIPS)

A zero-coupon Treasury, often created by splitting the coupon and principal payments of a regular bond into separate pieces, pays no periodic interest -- you buy it at a discount to face value and receive the face value at maturity. In the US, this type of bond typically generates taxable 'phantom income' each year in a regular taxable account, even though you receive no actual cash until maturity, so it is often held in a tax-advantaged account instead.

Currency risk for investors outside the US

Because Treasuries are denominated in US dollars, an investor whose home currency is not the dollar takes on exchange-rate risk on top of the bond's own price movement -- a stronger dollar boosts the return once converted back to your home currency, and a weaker dollar reduces it.

What to check before investing

How long you plan to hold the bond matters, since selling before maturity exposes you to price risk, while holding to maturity does not. Minimum purchase size, which specific maturities are available, trading fees, and how the security is held -- in your own name at TreasuryDirect versus in 'street name' through a broker -- all vary by platform, so compare the specifics before choosing one.

Two different routes depending on who you are

A US citizen or resident with a US bank account and Social Security number can buy directly from the government at TreasuryDirect.gov, with no broker and no secondary-market trading. Everyone else -- including US investors who want to sell before maturity -- typically goes through a brokerage account instead, where a wider range of existing issues is available but you may pay a trading spread or commission.

How the interest is generally taxed

In the US, Treasury interest is subject to federal income tax but is generally exempt from state and local income tax, which is one advantage over comparable state or corporate bonds for a US resident. Investors outside the US are taxed under their own country's rules for foreign-sourced interest income, which can differ significantly from the US treatment described above. This page explains general principles only, not tax advice for your specific situation -- tax rules change and vary by country, so confirm current rules or consult a tax professional before investing.

Frequently Asked Questions

Can you buy US Treasuries with a small amount of money?

Through TreasuryDirect, the minimum purchase is as low as $100. Through a brokerage account, minimums and whether fractional purchases are supported vary by broker, so check the specific platform you plan to use.

What does it actually mean that a bond's price and its yield move in opposite directions?

When market interest rates rise, newly issued bonds offer a higher coupon, which makes existing bonds with a lower fixed coupon less attractive at their original price -- so their market price falls to compensate, and vice versa when rates fall. This relationship affects anyone selling a Treasury before maturity, though it does not affect an investor who holds to maturity and receives face value regardless.