Question: Why does Budd lie about his Hanzo sword to his brother, Bill?
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Answer: Probably due to their recent "disagreement", as mentioned during their discussion. Since the sword was a present from Bill, it had should have had sentimental value. Budd is probably trying to make Bill think he no longer "cares" about Bill by showing little "love" for it. His way of making Bill feel bad for their recent "trouble".
XIII