Treasury bonds are liquid when you hold them in a brokerage account: the U.S. Treasury market is the deepest bond market in the world, with average daily trading volume above $1 trillion in 2025,1SIFMA. Research Quarterly: Fixed Income – Issuance and Trading and a sale settles the next business day. Two things complicate that picture. Selling before maturity means accepting whatever price the market offers that day, which can be less than you paid. And savings bonds — Series I and EE — are not marketable at all: they can’t be sold, they’re locked up for their first 12 months, and cashing out before five years costs you three months of interest.
Why Marketable Treasuries Trade So Easily
Treasury bills, notes, and bonds are classified as marketable securities, meaning they can be freely bought, sold, and transferred on the secondary market.2eCFR. 31 CFR Part 356 – Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds Central banks, pension funds, insurance companies, and individual investors all treat them as a safe-haven asset, so a buyer is almost always waiting. The gap between bid and ask prices stays narrow, which means transaction costs barely dent your proceeds. Even a large position generally clears without moving the price the way a thinly traded stock or corporate bond would.
Settlement follows the standard T+1 cycle, so cash from a sale reaches your account the next business day.3FINRA. Understanding Settlement Cycles: What Does T+1 Mean for You? For practical purposes, a Treasury held at a broker is close to cash.
Liquid Doesn’t Mean Safe From Loss
Being able to sell quickly is not the same as being able to sell at the price you paid. If you sell a Treasury before it matures, you get whatever the market will pay that day, and that price moves inversely with interest rates. When rates rise after you buy, the market value of your bond drops because newer bonds offer better yields. When rates fall, your bond is worth more.
The effect gets larger with longer maturities. A 30-year bond’s price can swing significantly on even small rate changes, while a three-month bill barely moves. Hold any Treasury to maturity and you receive the full face value regardless of what rates did in between. Sell early and there is no guarantee. This matters most for investors who buy long-term bonds as an emergency reserve; in a rising-rate environment, that “safe” asset can be worth less than you expected when you actually need the cash.
Brokerage vs. TreasuryDirect: Where You Buy Matters
Marketable Treasuries can be purchased through a bank or brokerage account, or directly from the government through TreasuryDirect.4TreasuryDirect. Buying a Treasury Marketable Security Both channels offer the same securities at the same auction prices, with a $100 minimum and $100 increments. Where the two paths part company is how quickly you can get out.
Buy through a brokerage and the security sits in an account where you can sell it on the secondary market with a few clicks, just like a stock. No forms, no waiting period beyond settlement.
Buy through TreasuryDirect and you must hold the security for at least 45 days before you can sell or transfer it.5TreasuryDirect. Selling a Treasury Marketable Security Even after the 45-day lockup, you can’t sell directly from TreasuryDirect. The security has to be transferred to a brokerage account first, and that transfer takes paperwork and time. Anyone who values liquidity is better off buying through a broker from the start.
Transferring Marketable Securities Out of TreasuryDirect
If you already hold marketable Treasuries in TreasuryDirect and want to sell, the transfer runs on FS Form 5511.6TreasuryDirect. Forms for Savings Bonds The form asks for your TreasuryDirect account number, the CUSIP of the security, the receiving brokerage’s name and routing information, and your account number there.
Your signature has to be certified. TreasuryDirect accepts medallion signature guarantees from institutions participating in the STAMP, SEMP, or MSP programs. Certain officers at depository institutions, credit unions, Federal Home Loan Banks, commissioned military officers, and U.S. court judges can also certify the signature.7TreasuryDirect. Signature Certification Most banks provide the guarantee to their own customers for free; non-customers may be charged or turned away.
Processing is the slow part. The completed form must be mailed to Treasury Retail Securities Services for manual processing, and TreasuryDirect has acknowledged that heavy mail volume can push response times into months. Once the transfer clears and the security shows up in your brokerage account, you can place a sell order and the proceeds settle the next business day under T+1.3FINRA. Understanding Settlement Cycles: What Does T+1 Mean for You?
Series I and EE Savings Bonds Are Not Liquid
Savings bonds operate under different rules than marketable Treasuries. Series I and Series EE bonds cannot be sold on any secondary market, cannot be transferred to a brokerage, and can only be redeemed through the government.
Both types carry a 12-month minimum holding period. During that first year your money is locked up entirely.8eCFR. 31 CFR Part 351 – Offering of United States Savings Bonds, Series EE9eCFR. 31 CFR Part 359 – Offering of United States Savings Bonds, Series I Redeem before five years and you forfeit the last three months of earned interest as a penalty. After five years, no penalty.
The annual purchase limit is $10,000 in electronic Series EE and $10,000 in electronic Series I per Social Security Number.10TreasuryDirect. How Much Can I Spend/Own?
Cashing Electronic Bonds
For bonds held in TreasuryDirect, log in, go to ManageDirect, and select the redeem option under “Manage My Securities.”11TreasuryDirect. Cashing EE or I Savings Bonds The cash value goes to the bank account linked to your profile. No forms, no mail.
Cashing Paper Bonds
Paper bonds can be redeemed at banks and credit unions that offer savings bond redemption services.12TreasuryDirect. For Financial Institutions Not every branch participates, and many will only cash bonds for existing customers. The Federal Reserve recommends that a customer relationship be established for at least 12 months before a financial institution cashes bonds for that person.13Federal Reserve Financial Services. Savings Bond Redemptions Frequently Asked Questions If you don’t have an established banking relationship, you may need to open one or redeem through TreasuryDirect.
The Disaster-Area Exception
The 12-month savings bond lockup has one exception. If you live in an area covered by an official disaster declaration, TreasuryDirect will waive the one-year holding period and let you cash bonds less than a year old.14TreasuryDirect. Cashing Savings Bonds Affected by a Disaster
For paper bonds that are damaged, illegible, or contaminated, download FS Form 1048, write “DISASTER” on the top of the first page and on the envelope, and mail it with certified signatures to Treasury Retail Securities Services in Minneapolis. Hold onto the physical bonds until the replacement or payment arrives. For electronic bonds under a year old, call TreasuryDirect at 844-284-2676 or submit FS Form 5512 marked “DISASTER.”
Tax Treatment When You Sell or Redeem
Interest earned on Treasury securities of every kind is subject to federal income tax but exempt from state and local income taxes under federal law.15GovInfo. 31 USC 3124 – Exemption From Taxation In a state with an income tax, that exemption can meaningfully increase your after-tax return compared with corporate bonds or CDs paying a similar rate.
For marketable Treasuries sold on the secondary market, any difference between your purchase price and sale price is a capital gain or loss, taxed under the normal capital gains rules. Interest received before the sale is reported as ordinary income.
For savings bonds, you can report interest each year as it accrues or defer reporting until you cash the bond or it matures.16TreasuryDirect. Tax Information for EE and I Bonds Most people defer. When you do cash out, TreasuryDirect or your bank reports the interest on a 1099-INT for any amount of $10 or more.17Internal Revenue Service. About Form 1099-INT, Interest Income The interest goes on the same line of your tax return as any other interest income.