{
  "id": "50e3e3da-01ad-576e-b72f-bd9af2de49b0",
  "slug": "treasury-note",
  "term": "Treasury Note",
  "aliases": [],
  "category": "Fixed Income",
  "category_slug": "fixed-income",
  "difficulty": "basic",
  "definition": "A Treasury Note (T-Note) is a U.S. government debt security with a maturity of 2, 3, 5, 7, or 10 years, paying semiannual coupon interest at a fixed rate and returning par value at maturity. The 10-year Treasury Note yield is the most widely referenced interest rate benchmark in global financial markets, influencing mortgage rates, corporate bond spreads, and equity valuations worldwide.",
  "key_takeaways": [
    "T-Notes are issued in 2-, 3-, 5-, 7-, and 10-year maturities and are the most actively traded segment of the U.S. Treasury market by both volume and outstanding notional.",
    "The 10-year T-Note yield is the global benchmark risk-free rate, used to price mortgages, corporate bonds, and as the discount rate in equity DCF models.",
    "T-Notes pay semiannual fixed coupons, distinguishing them from zero-coupon T-Bills and making their pricing sensitive to both current yields and reinvestment rate assumptions.",
    "The 2-year/10-year yield spread (2s10s) is the most commonly cited yield curve indicator, with inversions historically preceding U.S. recessions.",
    "10-year T-Note futures (CME Ultra 10-Year) are benchmark hedging instruments for interest rate risk management across fixed-income portfolios globally."
  ],
  "detailed_explanation": "Treasury Notes occupy the intermediate segment of the U.S. Treasury yield curve and are the most heavily traded instruments in the $25 trillion U.S. government securities market. While the 3-month T-Bill anchors the front end of the yield curve and the 30-year T-Bond anchors the long end, the 10-year T-Note is the most economically significant single point on the curve, serving as the reference rate for trillions of dollars in financial contracts, mortgage products, and corporate borrowings.\n\nThe mechanics of T-Note issuance, pricing, and trading closely parallel those of T-Bonds. Notes are issued through regular auction cycles: 2-year and 5-year notes are auctioned monthly, 3-year and 10-year notes are auctioned monthly with reopenings, and 7-year notes are auctioned monthly. The auctions are managed by the Bureau of the Public Debt and require participation by primary dealers—the 24 banks and broker-dealers authorized to trade directly with the Federal Reserve. Secondary market trading is concentrated in the over-the-counter interdealer market, primarily through electronic trading platforms such as BrokerTec (owned by CME Group) and eSpeed (now part of Nasdaq Fixed Income), which facilitate repo and outright Treasury trading.\n\nThe 10-year T-Note yield is the single most closely watched financial market indicator globally, reflecting the market's collective assessment of real growth expectations, inflation, and monetary policy over a medium-term horizon. Unlike the federal funds rate (which is a direct policy instrument controlled by the FOMC) or short-term T-Bill yields (which primarily reflect near-term rate expectations), the 10-year yield incorporates expectations for the entire interest rate cycle over the next decade, as well as a term premium that compensates investors for the additional risk of holding a longer-maturity instrument.\n\nThe slope of the yield curve—typically measured as the 10-year T-Note yield minus the 2-year T-Note yield—is one of the most powerful leading indicators of economic conditions. A normal (positively sloped) curve, with 10-year yields above 2-year yields, reflects expectations of economic growth and gradually rising interest rates, encouraging banks to borrow short and lend long (profit from the term spread). An inverted curve, with 2-year yields above 10-year yields, has preceded every U.S. recession since the 1960s and is interpreted as a signal that the Federal Reserve's current tight monetary stance will force a future easing cycle. The 2022–2023 yield curve inversion, which reached as deep as -100 bps at one point, raised significant recession concerns and influenced equity valuations, credit spreads, and capital allocation across asset classes.\n\nFor fixed-income portfolio management, T-Notes are used as core duration instruments. A portfolio manager wishing to increase portfolio duration will buy T-Notes; one wishing to reduce duration will sell them or short T-Note futures. The 10-year T-Note future (CME 'TY' contract) has a face value of $100,000 and is settled by delivery of eligible T-Notes with maturities between 6.5 and 10 years, making it the most liquid instrument for managing 10-year rate risk. Hedge funds and institutional investors use 10-year T-Note futures extensively for macro rate trading, duration overlay strategies, and hedging corporate bond portfolios against interest rate risk.",
  "example": "In March 2024, the on-the-run 10-year T-Note was trading at a yield of 4.22%. A corporate bond portfolio manager holds $200 million in investment-grade corporate bonds with an average duration of 7 years and wishes to hedge the interest rate risk portion of the portfolio (keeping only the credit spread exposure). The manager calculates the DV01 of the corporate bond portfolio as approximately $140,000 (7 years × $200M × 0.0001 = $140,000). The DV01 of a single 10-year T-Note futures contract is approximately $90 per contract at current yields. To fully hedge the interest rate risk, the manager sells 1,556 T-Note futures contracts ($140,000 / $90 = 1,556). Over the next month, 10-year yields rise 20 bps, causing the corporate bonds to decline approximately $2.8 million in price. The short futures position gains approximately $2.8 million (1,556 × $90 × 20 = $2.8 million), providing an effective hedge of the rate risk while leaving the portfolio exposed to the credit spread performance of its corporate bond holdings.",
  "formula": "Price = Σ[C/2 / (1 + y/2)^t] + 100 / (1 + y/2)^(2T); Modified Duration = Duration / (1 + y/2); DV01 = Modified Duration × Price × 0.0001",
  "formula_latex": null,
  "interactive_type": "calculator",
  "calculator_id": null,
  "related_terms": [
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    "corporate-bond",
    "credit-spread",
    "delivery",
    "duration",
    "dv01",
    "electronic-trading",
    "equity",
    "face-value",
    "fallen-angel",
    "federal-funds-rate",
    "futures-contract",
    "hedging",
    "inflation",
    "inflation-linked-bond"
  ],
  "backlinks": [
    "modified-duration",
    "nob-spread",
    "random-walk",
    "strips"
  ],
  "cross_references": [
    "bond",
    "corporate-bond",
    "credit-spread",
    "delivery",
    "duration",
    "dv01",
    "electronic-trading",
    "equity",
    "face-value",
    "federal-funds-rate",
    "futures-contract",
    "hedging",
    "inflation",
    "interest-rate",
    "monetary-policy",
    "par-value",
    "premium",
    "recession",
    "repo",
    "yield"
  ],
  "tags": [
    "level:basic",
    "cat:fixed-income"
  ],
  "asset_classes": [
    "fixed-income"
  ],
  "regulators": [],
  "see_also": [],
  "sources": [],
  "wordcount": 931,
  "checksum": "230f4bd46fe9ea42",
  "version": "2026.05.03",
  "license": "CC-BY-4.0",
  "updated_at": "2026-09-07T02:15:24+00:00",
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