How To Redeem Treasury Bonds: Step-by-Step Guide

treasury inflation protected securities

Treasury bonds, a type of Treasury marketable securities, are one way for Americans to invest their money. You can redeem Treasury bonds (aka T-bonds) in one of two ways, either by selling them on the secondary market or accessing their value at maturity. Whatever you choose, here’s your step-by-step guide on how to redeem them.

Table of Contents

  1. The two ways to redeem Treasury bonds
  2. How to sell Treasury bonds on the secondary market
  3. How to redeem Treasury bonds after they mature
  4. Tax implications for redeeming U.S. Treasury bonds
  5. Bottom line for bondholders

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The two ways to redeem Treasury bonds

Note

  • There are other types of bonds (including savings bonds, corporate bonds, municipal bonds, and more), but follow these steps for U.S. Treasury securities called Treasury bonds.


How to sell Treasury bonds on the secondary market

You can sell a Treasury bond on the secondary market by working with a bank, broker, or dealer.

If your Treasury bond is held on TreasuryDirect.gov, you will need to transfer the bond to a bank, broker, or dealer before doing this.

If your Treasury bond is already with a bank, broker, or dealer, simply contact them and follow the steps they provide to sell bonds.

To transfer a Treasury bond to a bank, broker, or dealer, you need this information from the financial institution:

  • Wire name
  • Routing number (ABA number)
  • Agent or broker’s name and phone number
  • Name and account number of the account you’re sending the bond

Once you have that information, log onto your TreasuryDirect account, take these steps:

  1. Select Manage Direct
  2. Choose the bonds you want to transfer
  3. Select External Transfer
  4. Fill out the TreasuryDirect Transfer Request (FS Form 5511)

If you’re transferring older bonds from the Legacy Treasury Direct system, fill out and mail Form 5179 as directed on the form.

How to redeem Treasury bonds after they mature

If you have matured Treasury bonds on a TreasuryDirect account, you can cash out the face value of the bonds directly from your account.

If you bought the bonds from a bank, broker, or dealer and they’ve reached their maturity date, they will give you the money, usually automatically. Reach out to the financial institution directly.

Headsup

  • Treasury bonds have 20-year or 30-year maturity windows, and the steps to sell them on the secondary market before maturity can be tedious if you’re unfamiliar with the process. Equity markets (including stocks, exchange-traded funds aka ETFs, and more) have more liquidity through traditional channels, which makes brokerages like Public.com a solid choice for investors.
     
    Check out Public’s Instant Transfers feature to immediately deposit and withdraw funds within your brokerage account, so you can take quick actions as needed.


Tax implications for redeeming U.S. Treasury bonds

Since you receive interest payments on your Treasury bonds every six months until the maturity date or sale, you must pay federal income taxes to the U.S. government each year. There are no state or local taxes. Since you pay taxes along the way, you can’t avoid it, even if you cash out early.

Did you know?

  • Public’s Long-Term Portfolio feature lets you lock in investments for the long haul, allowing you to take advantage of tax benefits such as long-term capital gains tax rates, which are typically lower than short-term capital gains tax rates.
     
    Long term portfolio” as a feature helps you lock those investments in, and also has an overview of why did you invest in these investments at the first place


Bottom line for bondholders

Backed by the federal government, Treasury bonds give investors a low-risk option for diversification of their assets. However, there is still interest rate risk in a Treasury bond investment. Learn about the different ways to invest through Public’s social investing platform, where you can tap into the community for all things investing.

Selling Treasury bonds? Make sure to brush up on your knowledge of Treasury inflation-protected securities (TIPS) by reading our in-depth explanation of how they work

What’s in your portfolio?

A Public.com portfolio unlocks a unique investing experience, with information tailored to each individual's portfolio.

Build your portfolio.

Frequently asked questions

Can you redeem a Treasury bond at any bank?

You must redeem a Treasury bond at the financial institution in which it’s held.

Can you redeem Treasury bonds in someone else’s name?

If a bondholder dies, an official beneficiary can redeem the bond. Otherwise, someone with legal authority to handle a person’s financial matters can do so.

Can you sell Treasury bonds at any time?

You must hold Treasury bonds for at least 45 days before selling on the secondary market if you purchase through TreasuryDirect.gov, or you can hold them until maturity (20–30 years from the purchase date). Treasury bonds purchased through brokers can generally be sold at any time after purchase.

What does the yield on a Treasury bond mean?

A T-bond’s yield-to-maturity is the equivalent annual yield an investor would receive if the investor held the bond to maturity.

What is the current interest rate for a Treasury bond?

Refer to this TreasuryDirect site for the latest 20-year and 30-year Treasury bond interest rates.

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