Treasury Notes: Definitions, Rates, and Guide

The middle child of the Treasury security group, Treasury notes, are the Treasury notes. Also known as T.notes, Treasury Notes are U.S. debt securities with intermediate maturities that can be purchased in two, three, five, seven, seven, and ten-year terms. A T-note investment is basically a loan to the U.S. Government that you will be paid back over time with interest.

One of the main types of Treasury securities is Treasury notes. They are different from Treasury bonds or bills in terms of their maturity dates and structure. Treasury inflation-protected bonds adjust their interest rates based on Consumer Price Index. Treasury notes pay a fixed interest rate every six months.

You don’t pay any income tax on the interest earned, and they are exempt from state- or local taxes.

These are some other Treasury Note basics:

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  If the T-note is held until maturity, the face value of the Tnote is the price.
  

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  This is different from the price that investors will pay for Treasury notes. It is affected by inflation and current interest rates.
  

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  The yield at maturity is the total return for Treasury notes that have been held to maturity.
  

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  The interest rate on T-notes refers to the semi-annual amount that you receive for lending the government money.
  

Any interest earned by Treasury Notes purchased directly from the government is added to your TreasuryDirect account. If you invest through a fund, the profits are usually reinvested automatically.

Current rate for 10-year Treasury Notes is 3.5%


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. TreasuryDirect auctions monthly T-note rates


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Every investment comes with some risk. Even though T-notes have a low risk, they are still susceptible to inflation, changes in interest rates, and economic fluctuations.

Treasury bonds and notes are longer-term investments than Treasury bills. They yield higher rates. Because of the risk of an economic downturn or rising rates that can impact the value of bonds and make longer-term Treasury bonds more risky than shorter-term bonds, it is better to invest in Treasury notes.

Prices decrease when interest rates rise and vice versa. This is because prices fall when bond prices increase. The longer it takes for a T note to mature, the more inflation or other economic events can lead to the Federal Reserve changing interest rates and T-note prices falling. This is called interest rate risk.

Your investment goals, risk tolerance, and timeline will determine whether Treasury notes or any other investment are right for you.

All types of Treasury securities are considered to be lower-risk investments than stocks. Because Treasury securities are insured by the U.S. government, they are generally considered lower-risk investments.

The relative stability of Tnotes in a portfolio of financial instruments is one of their benefits. They can be used to provide a cushion against the volatility of stocks. Treasury bonds of longer duration have lower interest rate risk, but offer higher yields than Treasury bills. Treasury bills mature in less time and don’t pay any interest. Treasury bonds mature in 20-30 years and pay semi-annually.

Treasury notes can be purchased through an online brokerage, a bank or directly from the U.S. government via TreasuryDirect.gov. T-Notes are available for purchase starting at $100 and going up to $10 million in increments.

You can purchase a variety of Treasury notes via mutual funds, exchange-traded funds (ETFs) for easy diversification.