How to Buy Bonds on Fidelity

The basic steps to buy a bond on Fidelity

To buy a bond on Fidelity, log into your account, go to the Trade tab, select Bonds from the product menu, search for the specific bond you want, review the offering details and price, and place your order. Fidelity lets you buy individual bonds directly through their platform without needing a broker to call. You can search by bond type (Treasury, corporate, municipal), maturity date, or credit rating to narrow down what you're looking for.

The entire process takes about five minutes once you know which bond you want. You'll see the current ask price, yield to maturity, and other details before you confirm the purchase. Your order settles in one to three business days, and the bond appears in your portfolio once settlement is complete.

Key Takeaways

• Fidelity's bond search tool lets you filter by type, maturity, rating, and yield so you can find bonds that match your timeline and risk tolerance.
• You pay the ask price shown at the time you place your order, plus any applicable markups that Fidelity discloses before you confirm.
• Treasury bonds, corporate bonds, and municipal bonds all trade through the same Bonds tab, but each has different tax treatment and credit risk.
• Bonds settle in one to three business days, so the money leaves your account a few days after you buy, not immediately.
• You can hold bonds to maturity or sell them before maturity through Fidelity's secondary market, though prices will fluctuate with interest rates.

Finding and filtering bonds on Fidelity's platform

Start by logging into your Fidelity account and clicking the Trade tab at the top of the page. Select Bonds from the dropdown menu. You'll land on Fidelity's bond search page, which shows a list of available bonds and a filter panel on the left side.

Use the filters to narrow your search. You can filter by bond type (Treasury, corporate, municipal, agency), maturity date range, credit rating, yield range, and price range. If you're looking for a bond that matures in five years, set the maturity filter to that range. If you want investment-grade bonds only, select ratings from AAA down to BBB. Fidelity updates its inventory throughout the trading day, so the bonds you see change as new offerings come in and others sell out.

Once you've filtered the list, click on any bond to see its full details: the coupon rate (the interest you'll receive), the current ask price, the yield to maturity, the issuer name, and the call date if one exists. Read these details carefully before you buy, because they determine how much income you'll earn and when.

Understanding the price and yield information

Bonds on Fidelity are priced as a percentage of their face value, usually $1,000. A bond quoted at 102 means you pay $1,020 (102% of $1,000). A bond quoted at 98 means you pay $980. The difference between what you pay now and what you get back at maturity affects your actual return.

The yield to maturity is the annual return you'll earn if you hold the bond until it matures and reinvest all coupon payments at the same rate. This number accounts for the price you pay today, the coupon rate, and the face value you'll receive at maturity. If a bond shows a 4.5% yield to maturity, that's your expected annual return over the life of the bond, not the coupon rate alone.

Fidelity also shows the current yield, which is simply the annual coupon divided by the price you pay. Current yield is useful for comparing income across bonds, but yield to maturity is more important for understanding your total return. Pay attention to the maturity date too — a bond maturing in two years will behave very differently from one maturing in twenty years if interest rates change.

Placing your bond order and understanding costs

Once you've selected a bond, click on it to open the order ticket. You'll see the ask price (the price you'll pay), the quantity (usually in increments of $1,000 face value), and a preview of your total cost. Fidelity shows any markup or spread it's charging before you confirm, so you know exactly what you're paying.

Review the order details one more time. Check the bond name, maturity date, coupon rate, and total cost. If everything looks correct, click Confirm or Place Order. Your order goes through immediately during market hours (9:30 a.m. to 4 p.m. Eastern time on weekdays). If you place an order after hours or on a weekend, it will execute when the market opens.

The bond settles in one to three business days, meaning the money leaves your account and the bond is officially yours. You don't need to do anything during settlement — Fidelity handles it automatically. Once settlement is complete, the bond shows up in your Holdings section with its current market value.

Different bond types and their tax treatment

Treasury bonds are issued by the U.S. government and are backed by the full faith and credit of the United States. They carry virtually no credit risk. The interest you earn is subject to federal income tax but exempt from state and local income tax. Treasuries typically offer lower yields than corporate or municipal bonds because they're safer.

Corporate bonds are issued by companies and carry credit risk — the risk that the company won't pay you back. Fidelity shows the credit rating so you can see how risky the issuer is. Interest from corporate bonds is subject to federal, state, and local income tax. Corporate bonds typically offer higher yields than Treasuries to compensate for the extra risk.

Municipal bonds are issued by states, cities, and other local governments. The interest is usually exempt from federal income tax, and often exempt from state and local tax if you live in the state that issued the bond. This tax advantage makes municipal bonds attractive to people in high tax brackets, even if the yield looks lower than a corporate bond. Fidelity's bond search lets you filter for municipal bonds and shows whether they're taxable or tax-exempt.

Holding bonds to maturity versus selling before maturity

If you hold a bond until its maturity date, you'll receive the full face value ($1,000 per bond) plus the final coupon payment. This is true regardless of what happens to interest rates or the bond's market price in the meantime. Your return is locked in at the yield to maturity you saw when you bought it.

If you need to sell a bond before maturity, you can do so through Fidelity's secondary bond market. The price you receive depends on current interest rates and the bond's credit quality. If interest rates have risen since you bought the bond, its market value will be lower than what you paid. If interest rates have fallen, its market value will be higher. Fidelity will show you the bid price (what buyers will pay) before you sell, so you know exactly what you'll receive.

Selling before maturity also means you'll owe capital gains tax on any profit, or you can claim a capital loss if you sell at a loss. If you plan to hold the bond for income and don't need the money, holding to maturity is usually simpler because you avoid market risk and the tax complexity of a sale.

Common mistakes to avoid when buying bonds on Fidelity

One common mistake is confusing the coupon rate with the yield to maturity. The coupon rate is the fixed interest payment you receive each year. The yield to maturity is your total return if you hold to maturity. A bond with a 3% coupon might have a 4.5% yield to maturity if you buy it at a discount. Don't assume the coupon rate is your return.

Another mistake is buying a bond with a call date without understanding what it means. A callable bond can be redeemed by the issuer before maturity, usually when interest rates fall. If you buy a callable bond at a premium (above face value), you might not earn the yield to maturity you expected because the issuer could call it away. Fidelity shows the call date and call price, so read those details before you buy.

A third mistake is buying too many bonds with the same maturity date. If all your bonds mature in five years, you'll have a large amount of money to reinvest at once, and you won't know what interest rates will be at that time. Spreading purchases across different maturity dates (a "bond ladder") reduces this reinvestment risk and gives you more flexibility.

Frequently Asked Questions

Do I need a minimum amount of money to buy a bond on Fidelity?

Most individual bonds on Fidelity have a minimum purchase of $1,000 face value (one bond). Some bonds may require multiples of $1,000, so you might need $2,000 or $5,000 to buy certain offerings. Check the order ticket before you confirm to see the exact minimum for the bond you've selected.

What's the difference between buying individual bonds and bond funds on Fidelity?

Individual bonds give you a fixed income stream and a known maturity date. Bond funds (mutual funds or ETFs) pool money from many investors to buy a diversified portfolio of bonds. With individual bonds, you know exactly what you own and when you'll get your money back. With bond funds, the price fluctuates daily and there's no maturity date, but you get instant diversification.

Can I buy bonds in a retirement account like an IRA?

Yes, you can buy individual bonds in any Fidelity account type, including IRAs, 401(k)s, and taxable accounts. The tax treatment of the bond's interest depends on the account type. In a traditional IRA, bond interest is tax-deferred. In a Roth IRA, it's tax-free. In a taxable account, you owe tax on the interest each year.

What happens if the bond issuer goes bankrupt before maturity?

If a corporate bond issuer goes bankrupt, you may lose some or all of your investment. This is why credit rating matters — higher-rated bonds are less likely to default. Treasury bonds have no default risk because they're backed by the U.S. government. Fidelity shows the credit rating so you can assess this risk before you buy.

How do I know what price to expect when I sell a bond before maturity?

Bond prices move inversely to interest rates. If rates rise after you buy, your bond's market value falls. If rates fall, its market value rises. Fidelity shows the current bid price (what you'd receive if you sold today) in your Holdings section. The exact price depends on current market conditions, so check it before you decide to sell.