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RESEARCH CENTER

Treasury Notes: Rates & Terms

Notes are issued in terms of 2, 3, 5, 7, and 10 years, and are offered in multiples of $100.

Price and Interest

The price and interest rate of a Note are determined at auction. The price may be greater than, less than, or equal to the Note's par amount. (See rates in recent auctions.)

The price of a fixed rate security depends on its yield to maturity and the interest rate. If the yield to maturity (YTM) is greater than the interest rate, the price will be less than par value; if the YTM is equal to the interest rate, the price will be equal to par; if the YTM is less than the interest rate, the price will be greater than par.

Here are some hypothetical examples of these conditions:

Condition Type of Security Yield at Auction Interest Coupon Rate Price Explanation
Discount (price below par) 10-year Note
Issue Date: 8/15/2005
4.35% 4.25% 99.196069 Below par price required to equate to 4.35% yield
Premium (price above par) 10-year Note reopening*
Issue Date: 9/15/2005
3.99% 4.25% 102.106357 Above par price required to equate to 3.99% yield

Sometimes when you buy a Note, you are charged accrued interest, which is the interest the security earned in the current interest period before you took possession of the security. If you are charged accrued interest, we pay it back to you as part of your next semiannual interest payment.

For example, you buy a 10-year Treasury Note issued August 15, 2005 and maturing August 15, 2015. If August 15, 2005 fell on a Saturday, Treasury would issue the Note on the next business day, Monday August 17, 2005. Besides the purchase price, you would pay Treasury for the interest accrued from August 15 to August 17, 2005. When you get the first semiannual interest payment, it will include the accrued interest you paid.

If you buy a Note directly from us and pay by automatic withdrawal, we withdraw the amount determined at auction.

If you are a TreasuryDirect customer, you should look at your Current Holdings, Pending Transactions Detail after 5 pm Eastern Time on auction day and check the price per $100 and accrued interest to determine the total price of the security. Next, make sure the source of funds you selected has sufficient funds to cover the total price. If you need to add funds to cover the purchase price, you have to do so before the issue date of the security.

If you buy from a bank or broker, please consult the bank or broker to learn payment arrangements.

Treasury Notes pay a fixed rate of interest every six months.

Options at Maturity - and Before

You can hold a Note until it matures, or sell it before it matures.

If you don't sell, your options at maturity depend on where you hold your security:

  • TreasuryDirect. Redeem the note or use its proceeds to reinvest into another note of the same term.
  • Legacy Treasury Direct. Redeem the note. (Notes cannot be reinvested in Legacy Treasury Direct, which is being phased out.)
  • Bank or Broker. For your options, consult your bank or broker.

Auction Pattern

TYPE OF NOTE FREQUENCY OF AUCTION
2-year Monthly
3-year Monthly
5-year Monthly
7-year Monthly
10-year Original Issues: February, May, August, November

*Reopenings: January, March, April, June, July, September, October, December

* In a reopening, we sell an additional amount of a previously issued security. The reopened security has the same maturity date and interest rate as the original security. However, as compared to the original security, the reopened security has a different issue date and usually a different purchase price.