Treasury Notes
Treasury Notes (commonly known as T-Notes) are a U.S. government debt security that has a fixed interest rate and an intermediate maturity (between one and 10 years). They can be purchased either from the U.S. government or through a bank. The denominations range from $1,000 to $1 million.
Buying treasury notes from the government involves purchasing the product either through a competitive or noncompetitive bid. By purchasing with a competitive bid, the investor can specify the desired yield but it doesn’t guarantee what bid will be received.
By purchasing with a noncompetitive bid, the investor will accept the yield that is determined at the auction.
T-Notes are a popular investment product because there is a large secondary market for them, adding to their liquidity. Interest payments on the notes begin at six months and continue until their maturity. The income from the interest payments is not taxable either on the municipal or state level but it is on the federal level.
At its maturity, the principal amount is payable. T-Notes have the greatest domestic credit rating by the lowest taxable yield available at its equivalent maturity.
T-Notes also trade as futures contracts.
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