Understanding the 10-Year Treasury Note
A 10-year U.S. Treasury note is essentially a loan I make to the U.S. government. In return, the government promises to pay me interest at a fixed rate every six months and return my principal after ten years. It's one of the ways the government raises money to fund its operations, and for investors, it represents a low-risk, predictable income stream.
What Makes the 10-Year Treasury Note Special?
Treasury notes, or T-notes, come in maturities from one to ten years. The 10-year note is the most widely tracked of all U.S. government debt instruments. Its yield serves as a benchmark for other interest rates, including mortgages and corporate debt. While I can hold a 10-year note to maturity, I’m not locked in—I can sell it anytime on the secondary market.
T-notes also behave differently from stocks. Typically, when stock markets fall, Treasury note prices rise, and vice versa. This makes them a useful tool for balancing risk in my investment portfolio.
How Treasury Notes Work
The U.S. Treasury issues three types of debt:
- Treasury bills (T-bills): Short-term, one year or less, sold at a discount with no interest payments.
- Treasury notes (T-notes): Medium-term, one to ten years, pay semi-annual interest.
- Treasury bonds: Long-term, more than ten years, also pay semi-annual interest.
T-notes and bonds pay a fixed interest every six months until maturity, when I get back the full face value. T-bills, in contrast, are issued below face value, and the difference between purchase price and face value is my earned interest.
The 10-Year Yield as a Benchmark
The yield on the 10-year note is a critical indicator in global finance. A rising yield suggests confidence in the economy but also higher borrowing costs, which can slow growth. A falling yield signals caution and uncertainty.
Since March 2022, the 10-year yield has climbed from roughly 1.7% to nearly 5% at its peak in October 2023, before settling around 4.4% in April 2025. This rise mirrored Federal Reserve rate hikes aimed at curbing inflation after the pandemic.
What Drives the Yield?
Several forces shape the 10-year yield:
- Investor sentiment: When people feel confident, they chase higher returns elsewhere, pushing Treasury yields up. In uncertain times, they flock to safety, pushing yields down.
- Inflation: Higher inflation erodes the real value of fixed payments, forcing yields higher. Lower inflation does the opposite.
- Federal Reserve policy: When the Fed raises interest rates, Treasury yields typically follow, reflecting the increased cost of borrowing.
Advantages of Treasury Notes
For me, the appeal of T-notes lies in stability and predictability. They provide portfolio diversification because their returns don’t correlate closely with stock markets. Specific benefits include:
- Safety: U.S. government backing makes T-notes among the safest investments.
- Partial tax advantage: Interest payments are exempt from state and local taxes.
- Flexibility: I can hold to maturity or sell early without restrictions.
Risks to Consider
No investment is without drawbacks. Treasury notes offer lower returns compared to stocks or high-yield corporate bonds. Inflation can erode purchasing power, especially if I hold longer-term notes. Rising interest rates can also reduce the market value of notes I might want to sell before maturity.
How to Buy T-Notes
I can purchase Treasury securities directly from the U.S. Treasury via TreasuryDirect or through a bank or broker. Notes are issued electronically—paper certificates are no longer available. The Treasury releases new 10-year notes four times a year: February, May, August, and November. Reopened notes, sold in other months, have the same terms but a different issue date and market-adjusted price.
Buying through a bank is possible, but I need to watch out for commissions or transaction fees that can eat into returns over time.
The Bottom Line
A 10-year Treasury note gives me predictable, low-risk income, paid twice a year, with my principal returned at maturity. They’re partially tax-exempt and act as a stabilizing element in an investment strategy. If I prefer certainty over chasing higher, riskier returns, T-notes are a reliable choice.
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