Treasury Note
BeginnerA Treasury note is a medium-term debt security issued by the US government, with a maturity of between two and ten years, that pays interest every six months.
Treasury notes sit between short-term Treasury bills and long-term Treasury bonds. They pay a fixed coupon twice a year and repay their face value at maturity.
For example, a 1,000 Treasury note with a 4% coupon and a five-year maturity pays 20 every six months, a total of 40 a year, and repays 1,000 after five years.
Like other US government debt, Treasury notes are considered very safe from default. They can, however, rise and fall in price before maturity as interest rates change. If rates rise after you buy a note, its market price will fall, although you will still receive full repayment if you hold it to maturity.
The ten-year Treasury note is one of the most closely watched interest rates in the world. Its yield influences mortgage rates, corporate borrowing costs and the valuation of shares and other assets. Investors watch it as a signal of expectations about economic growth and inflation.
For worked examples and full lessons, visit notesbysara.org.