Treasury Notes

Posted in Finance, Accounting and Economics Terms, Total Reads: 741

Definition: Treasury Notes

Treasury notes have a maturity period between 1 -10 years. The interest is paid on a  six monthly basis They are mostly traded in the secondary market because of these being marketable securities.  

They are considered to one of the safest investment because of their early period of maturity. They usually  offer the lowest coupon rates as they are  the safest form of investment.

There are  usually two types of auctions  based on the bidding amount and the channel for  bidding of treasury notes :

  • Non Competitive Bidding
  • Competitive Bidding

Non competitive Bidding -   The bidding in which the investor has to accept any yield offered on the notes . It is done through an online  medium.

Competitive Bidding – The yield on the notes is fixed by the investor.  However not more than 35% of the bidding amount can be placed as a competitive bid.   The bid has to be applied through a broker or a bank .


Demand Vs Yield of Treasury notes

  • When demand is high ie more investors are willing to buy the  treasury securities are issued above their face value .However  the interest and the face value to be paid back is fixed . The issue price for them is above par.
  • When the demand is low the notes are issue at a discount . However the interest to be paid is fixed and  thereby the yield increases.


Any increase in the yield on treasury notes increases the interest rates on open market loans.


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