Glossary
Treasury note
US government debt with a maturity of two to ten years that pays a fixed coupon every six months; the 10-year note is a global benchmark rate.
On this page
A Treasury note (T-note) is a US government bond issued with a maturity of 2, 3, 5, 7 or 10 years. It pays a fixed interest rate, the coupon, every six months and returns its face value at maturity. Notes make up the largest share of the Treasury market, and the yield on the 10-year note is one of the most important numbers in finance: mortgage rates, corporate borrowing costs and stock valuations all key off it.
How it works
The coupon is set at auction and stays fixed for the note's life. After issue, notes trade continuously, and their prices move opposite to interest rates. If new notes pay more, existing notes with lower coupons must sell at a discount until their yield matches.
What to keep in mind
The longer the maturity, the bigger the price swing for a given change in rates, a sensitivity measured by duration. A 2-year note moves relatively little; a 10-year note can lose several percent in a few weeks of rising yields. Held to maturity, a note returns its full face value regardless, so the price risk matters mainly to anyone who sells early.
The gap between 2-year and 10-year yields is a widely watched shape of the yield curve; when the 2-year yields more, the curve is inverted. Like bills, note interest is exempt from state and local income tax.