10-Year U.S. Treasury Note What it is A 10-year Treasury note is a debt security issued by the U.S. government with a 10-year maturity. It pays a fixed interest (coupon) twice a year and returns the face value (par) at maturity. Treasuries are used by the government to fund operations and are considered among the safest fixed-income investments. How it works
* Treasury securities are categorized by maturity:
* T-bills: up to 1 year (sold at a discount, no coupon)
* T-notes: 1 to 10 years (semiannual coupons)
* T-bonds: longer than 10 years (semiannual coupons)
* Notes are issued electronically and redeemed at par at maturity.
* Investors can hold notes to maturity or sell them anytime on the secondary market; price and yield move inversely.
Why the 10-year yield matters
* The 10-year Treasury yield is the most widely tracked benchmark for interest rates and is often referenced for mortgage and corporate borrowing cost trends.
* Changes in this yield influence broader financial conditions: rising yields generally signal higher borrowing costs and potentially stronger economic expectations; falling yields often indicate increased demand for safe assets and possible economic weakness.
What affects the 10-year yield
* Investor risk sentiment: demand for safe assets rises in uncertainty, pushing yields down; optimism reduces demand, pushing yields up.
* Inflation expectations: higher expected inflation erodes real returns, so yields typically rise; lower inflation expectations tend to lower yields.
* Federal Reserve policy: rate hikes and tighter monetary policy usually push Treasury yields higher; easing tends to lower them.
* Supply and market technicals: issuance volume, foreign demand, and market liquidity also influence yields.
Advantages
* Low credit risk: backed by the U.S. government.
* Diversification: returns are often uncorrelated with stocks and can offset equity volatility.
* Liquidity: actively traded in deep secondary markets.
* Tax benefits: interest is exempt from state and local income taxes (federal tax still applies).
* Flexibility: no minimum holding term; you can sell before maturity.
Disadvantages
* Lower returns: generally offer lower yields than equities and many corporate bonds.
* Inflation risk: fixed payments can lose purchasing power if inflation rises.
* Interest rate risk: rising rates reduce market value; selling before maturity can result in capital losses.
How to buy
* TreasuryDirect.gov: purchase new issues directly via non-competitive or competitive bids. Minimum purchase is typically $100 (increments of $100).
* Brokerages and banks: you can buy Treasuries through intermediaries, but fees or commissions may apply.
* All Treasury notes are issued electronically (no paper certificates except certain savings bonds).
Issuance schedule and reopenings
* New 10-year note auctions are typically scheduled quarterly (commonly in February, May, August, and November).
* The Treasury may conduct reopenings of recent 10-year issues in other months; reopened securities share the same maturity and coupon as the original issue but have a different issue date and market-derived price.
Common questions
* Can I sell a 10-year note before maturity?
Yes. Notes trade on the secondary market; price will reflect current interest rates and market conditions.
* Are interest payments taxed?
Interest is taxable at the federal level but exempt from state and local income taxes.
* Are 10-year Treasuries risk-free?
They carry minimal credit risk due to U.S. government backing, but they are subject to inflation and interest rate risk.
Bottom line The 10-year Treasury note is a core benchmark security that offers safety, liquidity, and predictable income. It’s suitable for investors seeking capital preservation, portfolio diversification, or an interest-rate benchmark, but it may offer lower long-term returns and is vulnerable to inflation and interest rate movements. Explore More Resources