What is a Treasury Note?

A treasury note is an interest-bearing debt security that is issued by the United States government. It has the following characteristics:

Maturity. A treasury note matures anywhere within a range of one to 10 years.
Interest rate. The interest rate associated with a treasury note is fixed.
Payment intervals. Interest payments are made to investors at six-month intervals.
Purchase methods. Treasury notes may be purchased at auction from the government, or on the secondary market from a third party at a later date.

Treasury notes are quite popular as investments, since the secondary market is active, and the U.S. government is considered to be a very safe issuer of securities.

Example of a Treasury Note

A U.S. Treasury note is issued on January 1, 2025, with a maturity dates of January 1, 2031 (a six-year note). It has a face value of $1,000 and coupon rate of 3.5% annually. Interest payments are made every six months. An investor buys the note on January 1, 2025. The stated coupon rate means that the investor will earn $35 per year. Since interest is paid semiannually, the investor receives $17.50 every six months. On January 1, 2031, the U.S. government repays the $1,000 face value to the investor. Over the six-year duration of the note, the investor will receive $210 in interest payments (calculated as $35/year x six years), and receive a $1,000 principal repayment, for a total received of $1,210.