You can cash out most bonds before they mature, but the amount you get back depends on current interest rates and how much time is left

When you hold a bond, you own a promise to be repaid. That promise has a maturity date — the day the issuer returns your full principal. But you don't have to wait until then. Most bonds can be sold or redeemed early, though the mechanics and the money you receive differ depending on what type of bond you own and who issued it.

The key difference: some bonds you can simply sell to another buyer on the secondary market, while others you redeem directly with the issuer. The price you get for selling is usually different from what you paid, because bond prices move when interest rates change. The amount you get for redeeming depends on the bond's terms and whether the issuer allows early redemption at all.

Key Takeaways

  • Treasury bonds, municipal bonds, and corporate bonds can be sold on the secondary market through a broker, but the price fluctuates based on current interest rates.
  • Savings bonds (Series EE and Series I) must be redeemed directly through TreasuryDirect or a bank, and have penalties if cashed before five years of ownership.
  • Bond prices fall when interest rates rise, so selling early during a rate increase means you receive less than you paid.
  • Some corporate and municipal bonds have call provisions that let the issuer redeem them early, which limits your upside if rates fall.

Selling bonds on the secondary market through a broker

If you own a Treasury bond, a municipal bond, or a corporate bond issued by a company, you can sell it to another investor before maturity. You do this through a broker — the same firm that holds your brokerage account or the bank where you keep your bonds.

When you sell, you receive the current market price, not the price you paid. That price depends on what interest rates are doing. If rates have risen since you bought the bond, its price falls — because new bonds now pay more interest, so older bonds paying less are worth less. If rates have fallen, its price rises. You also receive any accrued interest owed to you since the last coupon payment.

The process is straightforward: contact your broker or bank, tell them you want to sell the bond, and they execute the sale on the secondary market. The money typically arrives in your account within two to three business days. You'll receive a confirmation showing the price, the accrued interest, and any fees your broker charged.

Redeeming savings bonds directly with the Treasury

Series EE bonds and Series I bonds are different. You don't sell them on a market — you redeem them directly with the U.S. Treasury through TreasuryDirect, the federal government's online bond platform, or through a bank.

Series EE bonds purchased after May 2003 must be held for at least one year before you can redeem them. If you redeem before five years of ownership, you lose the last three months of interest. So if you've owned the bond for two years and redeem it, you get back your principal plus interest earned through year 1 and nine months — you forfeit the interest from months 21 through 24.

Series I bonds have the same one-year minimum and the same three-month interest penalty if redeemed before five years. The difference is that I bonds pay a variable interest rate that adjusts every six months, so the amount you receive depends on when you redeem and what the current rate is.

To redeem through TreasuryDirect, log into your account, select the bond, and request redemption. The money arrives in your linked bank account within a few business days. If you hold paper bonds, you can redeem them at most banks — bring the bond certificate and a form of ID.

Understanding how interest rates affect the price you receive

The most important thing to understand about selling bonds early is that their price moves opposite to interest rates. This is the core mechanic that determines whether you gain or lose money.

Imagine you bought a corporate bond paying 3% interest for $10,000. A year later, new corporate bonds of the same quality are paying 5%. Your bond still pays only 3%, so it's less attractive. If you try to sell it, buyers will only pay less than $10,000 — maybe $9,400 — because they can get a better rate elsewhere. You've lost $600 on paper, even though the bond itself is still sound and will pay back the full $10,000 at maturity.

The opposite happens if rates fall. If new bonds are now paying 1.5%, your 3% bond is more valuable. You might sell it for $10,600. You've gained $600 because you locked in a higher rate before rates dropped.

The longer the bond's maturity, the bigger the price swing. A 30-year Treasury bond's price moves much more than a 2-year Treasury bond when rates change, because you're locking in that rate for much longer.

Callable bonds and what happens if the issuer redeems early

Some corporate bonds and municipal bonds have a call provision. This means the issuer can redeem the bond before maturity, usually after a set number of years. If you own a callable bond and rates fall, the issuer will likely call it — they'll pay you back early so they can issue new bonds at the lower rate.

This sounds good until you realize what it means for your money. If you bought a bond paying 5% and rates fall to 2%, you were planning to collect 5% for the next 20 years. But the issuer calls the bond, hands you your principal back, and now you have to reinvest that money at 2%. You've lost the benefit of the higher rate.

When you buy a callable bond, the issuer usually pays a slightly higher interest rate to compensate you for this risk. But it's still a risk. If you're considering selling a callable bond before maturity, check whether it's been called or is likely to be called soon — your broker can tell you the call dates and call price.

Fees and costs to expect when cashing out

When you sell a bond through a broker, you may pay a transaction fee. Some brokers charge a flat fee per trade — often $10 to $25. Others charge a percentage of the trade value. A few brokers offer commission-free bond trading, but this is less common than with stocks.

When you redeem a savings bond through TreasuryDirect, there are no fees. If you redeem through a bank, the bank may charge a small fee, though many do not.

You'll also owe taxes on any gain. If you sold a bond for more than you paid, that gain is taxable income in the year you sold it. If you sold for less, you have a loss, which can offset other capital gains. Savings bonds are taxed differently — you owe federal income tax on the interest earned, but not state or local tax.

What to do if you need the money before the bond matures

If you're holding a Treasury, corporate, or municipal bond and need cash, selling on the secondary market is usually your fastest option. You'll have the money in a few days, though the price depends on current rates.

If you're holding a savings bond and need the money, you can redeem it anytime after one year of ownership. Just know that redeeming before five years costs you three months of interest. If you can wait until the five-year mark, you'll get the full amount earned.

Before you sell or redeem, think about whether you actually need the money now or whether you're selling because you're worried about rates. If rates are rising and you're tempted to sell to avoid further losses, remember that you lock in that loss by selling. If you hold to maturity, you get your full principal back regardless of what rates do.

Frequently Asked Questions

What's the difference between selling a bond and redeeming it?

Selling means finding another buyer and transferring ownership — you get whatever the market price is that day. Redeeming means cashing it in directly with the issuer for a set amount. Savings bonds are redeemed. Treasuries and corporate bonds are usually sold, though some can be redeemed under specific conditions.

Can I sell a savings bond before five years?

You can redeem a Series EE or Series I bond after holding it for one year, but you'll lose the last three months of interest. If you hold for five years or more, you keep all interest earned. There's no secondary market for savings bonds — you can only redeem them with the Treasury or a bank.

Why is my bond worth less than I paid for it?

Interest rates have risen since you bought it. New bonds now pay more, so older bonds paying less are worth less on the secondary market. This is normal and doesn't mean the bond is in trouble — it will still pay back your full principal at maturity. The loss is only real if you sell before maturity.

Do I pay taxes when I cash out a bond?

Yes, if you sold it for more than you paid, you owe federal income tax on the gain. If you sold for less, you have a loss that can offset other gains. For savings bonds, you owe federal income tax on the interest earned, but not state or local tax.

How long does it take to get my money after I sell or redeem?

Secondary market sales through a broker typically settle in two to three business days. Redemptions through TreasuryDirect or a bank usually take a few business days for the money to reach your account. The exact timing depends on your bank and the time of week you submit the request.