A Treasury note is a loan to the US government for 2, 3, 5, 7 or 10 years. You collect a fixed coupon every six months and get the face value back at maturity, and the only thing that moves in between is the price another investor would pay you for the note. This guide follows real notes from Treasury's October 2026 auctions through each step: what $10,000 cost, when every payment arrives, why most new notes sell just under par and how far the price shifts when yields change. For the whole family of Treasury securities, start at the US Treasuries hub.
What is a Treasury note?
A Treasury note is a fixed-rate US government security that matures in 2 to 10 years and pays interest every six months until then.
Treasury sells notes with terms of 2, 3, 5, 7 and 10 years. Like all marketable Treasuries, they exist only as electronic records, sell in $100 steps from a $100 minimum and are backed by the full faith and credit of the United States. A noncompetitive bid can buy up to $10 million of a single auction, and one competitive bidder can win at most 35% of the offering. Notes sit between Treasury bills, which mature within a year and pay no coupon, and Treasury bonds, which run 20 or 30 years.
Notes are also the biggest slice of the government's marketable debt: $16.28 trillion was outstanding at the end of September 2026, according to the Monthly Statement of the Public Debt. Late October alone added $69 billion of new 2-year notes, $70 billion of 5-year notes and $44 billion of 7-year notes. That depth is why brokers can usually buy or sell a note on any business day.
Two relatives share the name. Treasury floating rate notes are 2-year notes whose rate resets every week, and TIPS include 5- and 10-year notes whose principal tracks inflation. This page covers ordinary fixed-rate notes. For how they line up against bills and bonds on income, price risk and taxes, see T-bills vs notes vs bonds.
How often do Treasury notes pay interest?
A Treasury note pays interest twice a year, on fixed dates six months apart that line up with its maturity date.
Each payment is half the annual coupon on your face value, however many days the half-year happens to have, under the formulas in Treasury's auction rules. The 2-, 5- and 7-year notes pay at the end of a month because they mature on the last day of one, while the 3- and 10-year notes pay on the 15th. When a payment date falls on a weekend or a federal holiday, the money arrives on the next business day, with no extra interest for the wait.
Worked example: Coupon schedule for $10,000 of the October 2026 five-year note
Treasury auctioned the five-year note (CUSIP 91282CRT0) on October 27, 2026. The high yield was 4.845%, the coupon was set at 4.75%, and the note was dated October 31 and issued on Monday, November 2.
- Price: $10,000 × 99.582397 ÷ 100 = $9,958.24
- Accrued interest for October 31 to November 2: $0.26243 per $1,000, or $2.62
- Total paid on November 2, 2026: $9,960.86
- Each coupon: $10,000 × 4.75% ÷ 2 = $237.50
| Payment | Scheduled date | Cash arrives | Amount |
|---|---|---|---|
| 1 | April 30, 2027 | Friday, April 30, 2027 | $237.50 |
| 2 | October 31, 2027 | Monday, November 1, 2027 | $237.50 |
| 3 | April 30, 2028 | Monday, May 1, 2028 | $237.50 |
| 4 | October 31, 2028 | Tuesday, October 31, 2028 | $237.50 |
| 5 | April 30, 2029 | Monday, April 30, 2029 | $237.50 |
| 6 | October 31, 2029 | Wednesday, October 31, 2029 | $237.50 |
| 7 | April 30, 2030 | Tuesday, April 30, 2030 | $237.50 |
| 8 | October 31, 2030 | Thursday, October 31, 2030 | $237.50 |
| 9 | April 30, 2031 | Wednesday, April 30, 2031 | $237.50 |
| 10 | October 31, 2031 | Friday, October 31, 2031 | $237.50 plus $10,000 principal |
Over five years you receive $2,375.00 in coupons and $10,000.00 in principal, $12,375.00 in all, for an outlay of $9,960.86. The first coupon is a full $237.50 even though you owned the note for two days less than the half-year; the $2.62 of accrued interest paid for those two days up front.
The coupons land as cash, so a note does not compound on its own. If you plan to reinvest them, the compound interest calculator shows what that adds over the life of a note at a rate you assume.
How does the auction set a note's coupon?
Treasury picks the coupon after bidding closes, using the highest one-eighth-point rate that keeps the price at or just below par at the auction's high yield.
Competitive bidders name the yield they want, and Treasury accepts bids from the lowest yield upward until the offering is sold. The highest accepted yield, called the high yield, applies to every winner, including noncompetitive bidders who simply agree to take it. How Treasury auctions work covers the bid types, deadlines and calendar. Here is what that process produced for each note term in October 2026:
| Note | Auction date | High yield | Coupon | Price per $100 | Amount offered |
|---|---|---|---|---|---|
| 2-year | October 26, 2026 | 4.708% | 4.625% | 99.843155 | $69 billion |
| 3-year | October 6, 2026 | 4.932% | 4.875% | 99.842840 | $58 billion |
| 5-year | October 27, 2026 | 4.845% | 4.750% | 99.582397 | $70 billion |
| 7-year | October 29, 2026 | 4.894% | 4.875% | 99.887964 | $44 billion |
| 10-year, reopened | October 7, 2026 | 5.300% | 4.625%, set in August | 94.864261 | $39 billion |
In each new issue the coupon is the high yield rounded down to the nearest eighth: 4.708% became 4.625%, and 4.845% became 4.75%. Because the coupon sits slightly below the yield, the price lands slightly below par, and that small discount is paid back at maturity as extra return. If a high yield ever came in under 0.125%, Treasury would still set the coupon at 0.125% and the note would sell above par.
The 10-year row works differently because it was a reopening: Treasury sold more of an existing note with the same CUSIP, coupon and maturity, so the auction set only the price. A new 10-year note comes out in February, May, August and November and is reopened in the other eight months, while the 2-, 3-, 5- and 7-year notes are new every month. Treasury's tentative schedule had the next new 10-year note auctioning on November 10, 2026, for settlement on November 16.
Why do notes sell at a premium or a discount?
A note trades below face value when the market yield exceeds its coupon, at face value when the two match, and above it when the yield is lower.
The price is what reconciles the fixed coupon with the yield buyers want. At the October 7 reopening, bidders wanted 5.300% from a note paying 4.625%, so they paid 94.864261 per $100. The $513.57 gap on $10,000 comes back at maturity in August 2036 and lifts their return to the yield they bid. The reverse happens when yields fall: if 2-year yields had dropped to 4.25% straight after the October auction, the new 4.625% note would have been worth about 100.71 per $100, a $71 premium on $10,000, because its coupons beat what a fresh note would pay.
Premiums and discounts also matter at tax time. A discount at original issue counts as original issue discount (OID), but the IRS lets you treat it as zero when it is smaller than 0.25% of face value times the number of full years to maturity. The five-year note's $41.76 discount on $10,000 is well under that $125 threshold, so it is simply reported as a capital gain at maturity. Larger discounts and premiums follow their own rules, such as amortizing a premium against the interest. Are T-bills taxable? covers reporting for all Treasuries, and a tax professional can confirm how the rules apply to you.
What is accrued interest on a Treasury note?
Accrued interest is the part of the current coupon earned before you owned the note; you pay it at purchase and recover it in the next coupon.
Treasury pays each coupon in full to whoever holds the note on the payment date. So anyone who buys between coupon dates compensates the earlier owner for the days already elapsed: the seller in a broker trade, or Treasury itself when an auction's issue date falls after the note's dated date. Treasury's auction results list accrued interest per $1,000 next to the price, and brokers add it to the quoted price when a trade settles. The effect is small for a new issue and large for a reopening.
Worked example: Buying $10,000 of the 10-year note at its October 2026 reopening
The 10-year note first auctioned in August 2026 (CUSIP 91282CRF0) pays 4.625% on February 15 and August 15 and matures on August 15, 2036. Treasury sold more of it on October 7, 2026 at a high yield of 5.300%, for issue on October 15, which was 61 days into a 184-day coupon period.
- Price: $10,000 × 94.864261 ÷ 100 = $9,486.43
- Accrued interest: $23.125 per $1,000 × 61 ÷ 184 = $7.66644 per $1,000, or $76.66
- Total paid on October 15: $9,563.09
- First coupon: $231.25, due February 15, 2027 and paid on February 16 because the 15th is a federal holiday
- Of that coupon, $76.66 returns the accrued interest you paid and $154.59 is interest earned over the 123 days you owned the note
For federal tax, only the $154.59 counts as your interest income from that first coupon; the IRS treats the $76.66 as a return of your own money. The accrued interest glossary entry covers the day counts behind the calculation.
How much do note prices move when yields change?
A par note loses roughly its duration in percent for each 1-point rise in yields: about 1.9% for a 2-year note and 7.5% for a 10-year.
The table applies that to newly issued notes priced at par, with coupons equal to Treasury's par yields on October 30, 2026, and an immediate, parallel move in yields. Each cell is the change in market value of $10,000 face; duration is modified duration in years.
| Note | Par yield, Oct 30, 2026 | Duration | Yields fall 1 point | Fall 0.5 point | Rise 0.5 point | Rise 1 point | Rise 2 points |
|---|---|---|---|---|---|---|---|
| 2-year | 4.56% | 1.9 | +$191 | +$95 | −$94 | −$187 | −$369 |
| 3-year | 4.65% | 2.8 | +$282 | +$140 | −$137 | −$272 | −$536 |
| 5-year | 4.71% | 4.4 | +$453 | +$223 | −$218 | −$430 | −$838 |
| 7-year | 4.80% | 5.9 | +$610 | +$299 | −$289 | −$569 | −$1,099 |
| 10-year | 4.94% | 7.8 | +$820 | +$400 | −$382 | −$746 | −$1,425 |
Three patterns stand out. Risk climbs steeply with term: the 10-year note moves about four times as much as the 2-year. Gains from falling yields are larger than losses from rising yields of the same size, a curvature known as convexity. And the moves are not hypothetical: between the August 12 and October 7 auctions, the 10-year note's yield rose 0.617 point and its price fell from 99.540696 to 94.864261, a $467.64 drop on $10,000, or 4.7%.
None of this changes what the note pays. The coupons and the face value are fixed on the day you buy, so price swings become real gains or losses only if you sell. Why bond prices fall when rates rise works through the duration math, and bond duration defines the measure.
How do you buy and sell Treasury notes?
You can buy new notes at auction through TreasuryDirect or a broker and existing notes from a broker, but selling before maturity always goes through a bank or broker.
TreasuryDirect. The Treasury's own site takes noncompetitive bids from $100, with no fees. It debits the price plus any accrued interest from your linked bank account on the issue date and pays coupons to the same account. To sell before maturity, a note must stay in the account for 45 calendar days and then be transferred to a bank or broker. The TreasuryDirect account guide covers setup and sign-in.
A brokerage account. Most brokers let you bid at auctions or buy notes already trading, including older issues with coupons above or below today's rates, in a taxable account or an IRA. You can sell on any business day at the bid price, which sits a little below the ask, and the gap tends to be wider for small lots and older issues. Selling Treasuries before maturity explains the costs and the tax on a gain or loss.
Funds. A Treasury note fund or ETF holds many notes and keeps replacing them as they age, so it never matures. Its price stays exposed to rate changes for as long as you own it, unlike a single note held to its maturity date.
Comparing a note with the alternative of rolling short-term bills? Price the bill side first:
What are the risks of Treasury notes?
Notes carry very little credit risk, but owners still face price risk if they sell early, inflation risk, reinvestment risk and some practical liquidity limits.
- Interest-rate risk. If yields rise and you need to sell, you take a loss: about $746 on $10,000 of a new 10-year note after a 1-point rise. Plans change, so a note maturing after you need the money carries this risk even if you intend to hold it.
- Inflation risk. Coupons are fixed in dollars. On October 30, 2026 the 10-year note's par yield was 4.94% and the 10-year TIPS real yield was 2.60%, so the market's implied inflation rate was about 2.34% a year. If inflation averages more than that, a TIPS of the same term would come out ahead; real returns and inflation shows how to run the comparison.
- Reinvestment risk. Every coupon and the final principal must be reinvested at whatever rates prevail then. The five-year note in the example hands back $2,375 in coupons along the way, and their value to you depends on future rates.
- Liquidity limits. Notes held at TreasuryDirect cannot be sold there, and a broker sale costs the bid-ask spread.
- Tax drag. Federal tax is due on each coupon in the year it is paid, even if you reinvest it, although no state or local income tax applies.
Treasuries are backed by the full faith and credit of the United States, which removes default worry for most purposes but not price swings. Are Treasuries risk-free? looks at the limits of that protection, and types of investment risk defines each risk above.