Treasury note is a negotiable debt obligation issued by the US government with maturity between one and ten years, which are backed by full faith and credit of the government.
Treasury notes can be bought either on primary market directly from the government or on large secondary market. When buying directly on primary market, government organizes auction in order to collect bids that can be either competitive or noncompetitive. Competitive bid refers to investor’s possibility to specify the yield he wants, but the can be approved or not approved by the government. Non-competitive bid refers to investor’s acceptance of the yield offered by the government.
Unlike T-Bills, Treasury notes do pay interests, which are paid every six months until notes’ maturity. Treasury notes are exempt from state and local taxes, but federal taxes are due on the earned interest.
Treasury notes are often called just T-Notes.
