Treasury Note

A Treasury note (often called a T-note) is a loan you make to the U.S. federal government for a set number of years, in exchange for regular interest payments and your money back at the end. It sits in the middle of the government's family of debt securities: shorter than a Treasury bond, longer than a Treasury bill.

Mechanically, the government sells notes at auction, you (or a fund you own) hold the note, and every six months you receive a fixed interest payment called a coupon. When the note matures, you get back its face value, typically $1,000 per note. Notes are issued in a handful of standard maturities, generally ranging from two to ten years, and because the government issues them constantly, there is a large and active secondary market — meaning you don't have to hold to maturity, you can sell to another investor beforehand.

The nuance beginners trip over is the difference between the coupon rate and the yield. The coupon is fixed at issuance and never changes; the yield is what the note actually returns to a buyer today, and it moves constantly as note prices move on the secondary market. When traders say "yields rose," they mean note prices fell, because price and yield move in opposite directions. A trader watching "the 10-year" on a screen is watching the yield of the current 10-year Treasury note, not its price or coupon.

Notes, bills, and bonds are all Treasury debt distinguished mainly by original maturity length: bills are the shortest (under a year), notes are the middle stretch (roughly two to ten years), and bonds run longest (beyond ten years, up to thirty). All three trade actively and their yields are watched as a barometer of interest-rate expectations across the economy.