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.