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In Kill Bill Vol.2, when Bill calls his brother Bud to offer him support and to warn him about Beatrix seeking her revenge, he refuses saying:

That woman deserves her revenge. And we deserve to die. But then again, so does she. So, I guess we'll see, won't we?

Bill asks him about his Hattori Hanzo sword. Budd lied and claimed he pawned the sword (for $250). Why would he lie?

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    Lets not forget the inscription on the sword itself "to my brother Budd - the only man I've ever loved. Bill" not only is the sword a talisman for a life budd has left behind and obviously regrets as his speech about deserving to die suggests. this could alude to the fact that they both were fatherless children, the film doesn't go into detail about Budd's childhood but the part where it says that bill collects father figures is interesting, and out of all of these father figures Budd is the only one he loved. A shared comradery that only blood / bonding / life experience could create.
    – Hitchmo
    Dec 24, 2016 at 22:58

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I do not have an authoritative answer, but my impression is this:

Budd is not particularly enthused about the entire conversation with Bill or where Bill wants it to go, be it because of his animosity towards Bill, his battle weariness, surrendering his fate to Beatrix, or a combination of these motivations – which are all supported by the rest of the dialogue.

Saying that he pawned his Hanzo sword seems like the easiest option to end the conversation and indeed it ends shortly afterwards. Had Budd said that he still had the sword, this would have given Bill leverage to make (or try to make) Budd join his cause. Had Budd said that he sold the sword for an appropriate price, this would obviously contradict Budd’s apparent financial situation.

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From IMDB FAQ

Budd lies simply to hurt Bill. Obviously Bill and Budd are feuding and Bill must have done something to Budd (seeing as how Bill says "Can't we just put the past in the past?"). The sword was a huge gift to Budd; to tell Bill that he sold it was just meant to be a crushing blow to his heart. It was also a way for Budd to show Bill what his life is like now: he hocked an absolutely priceless artifact for a paltry $250. He also makes mention that he lives in a trailer and works in a strip bar, which obviously doesn't pay very much. He's essentially broke and the smallest bit of cash is worth more to him than a priceless sword from his brother, whereas Bill could have easily helped him out, as we see Bill's life is much more privileged; he lives in a tropical paradise in a mansion.

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