Treasury Note (T-note)
What Is a Treasury Note (T-Note)?
A Treasury note (T-note) is a government debt security issued by the U.S. Treasury with maturities ranging from 2 to 10 years. Investors who purchase Treasury notes receive regular interest payments and repayment of the principal when the note matures.
Treasury notes are one of the most widely traded government securities.
Why It Matters
Treasury notes help finance federal government spending and provide investors with relatively stable income. Because they are backed by the U.S. government, they are considered lower risk compared with many other investments.
The yield on the 10-year Treasury note is also widely used as a benchmark for mortgage rates and other interest rates.
How Treasury Notes Work
Treasury notes pay interest every six months until maturity.
Key features include:
- fixed interest rate
- maturity of 2, 3, 5, 7, or 10 years
- repayment of face value at maturity
Treasury notes can be purchased directly from the government or traded on secondary markets.
Example
An investor purchases a 10-year Treasury note with a 3.5% interest rate and receives interest payments twice per year.
Treasury Note vs Treasury Bill
- Treasury notes pay regular interest payments.
- Treasury bills are short-term securities that do not pay periodic interest.
FAQs About Treasury Notes
Are Treasury notes safe investments?
Yes, they are backed by the U.S. government.
How often do Treasury notes pay interest?
Interest is paid twice per year.
Why are Treasury notes important to financial markets?
Their yields influence many lending and borrowing rates.
Related Terms
