You can buy a 10-year Treasury note for as little as $100, either directly from the government through TreasuryDirect or through a brokerage account. In return for lending money to the U.S. government for a decade, you receive a fixed interest rate paid every six months, and you get your principal back at face value when the note matures. New 10-year notes are auctioned four times a year, and the same note is reopened in the months between.
What You’re Buying
A 10-year Treasury note is a loan to the federal government with a fixed coupon rate set at auction. The Treasury pays that interest in two installments per year for ten years and returns your principal at the end. The minimum purchase is $100, and you can buy in $100 increments up to $10 million per auction using a non-competitive bid.1TreasuryDirect. Buying a Treasury Marketable Security
The predictability is the point. You know the coupon, you know the payment dates, and you know when your principal comes back. The trade-off is that your rate stays fixed even if market rates climb after you buy.
When Auctions Happen and How Bidding Works
The Treasury sells new 10-year notes in February, May, August, and November. In the other eight months, it reopens (reissues) the most recent note. Auctions generally take place in the second week of the month, with the notes issued on the 15th.2TreasuryDirect. General Auction Timing
You bid one of two ways. A non-competitive bid means you agree to accept whatever yield the auction produces, and in return you’re guaranteed to receive your full order. Most individual investors take this route. A competitive bid means you specify the minimum yield you’ll accept; if the auction clears below your number, you get nothing, and if it clears at or above your bid, you’re filled at the auction’s high yield rather than the yield you bid.
Every winning bidder pays the same price. The Treasury fills all non-competitive bids first, then works through competitive bids from the lowest yield upward until the entire offering is sold. The highest accepted yield sets the rate all winners receive.3TreasuryDirect. How Auctions Work If the auction yield ends up higher than the coupon rate, you’ll pay less than $100 per note (a discount). If the yield lands below the coupon, you’ll pay a small premium.
Buying Through TreasuryDirect
Opening the Account
TreasuryDirect is the government’s portal for buying Treasuries with no middleman and no fees. To open an account you need a Social Security Number or Taxpayer Identification Number, a U.S. address, an email address, and a U.S. bank account that accepts ACH transactions.4eCFR. 31 CFR 363.11 – Who Is Eligible to Open a TreasuryDirect Account? You must be at least 18 and legally competent. Check your bank routing and account numbers carefully during setup, because errors delay purchases and interest payments.
Trusts, estates, corporations, and other entities can also open accounts. Entity accounts need an Employer Identification Number and cannot name a secondary owner or beneficiary on their securities.4eCFR. 31 CFR 363.11 – Who Is Eligible to Open a TreasuryDirect Account?
Placing the Order
Once your account is active, open the BuyDirect tab, choose the 10-year note, and enter your purchase amount at $100 or more. Select the upcoming auction date and confirm your linked bank account has the funds. The Treasury debits your account on the issue date, not the bid date, so the money needs to be there by then.1TreasuryDirect. Buying a Treasury Marketable Security After the auction closes, you’ll get a confirmation showing your coupon rate, yield, and the exact price you paid.
Staging Cash With a Zero-Percent Certificate of Indebtedness
TreasuryDirect offers a zero-percent certificate of indebtedness, which is a non-interest-bearing holding account inside your profile. It rolls over daily and lets you park cash in advance of a scheduled purchase.5eCFR. 31 CFR 363.131 – What Is a TreasuryDirect Zero-Percent Certificate of Indebtedness? It pays nothing, but it keeps your funds staged so you’re not scrambling to have enough in your bank account on the issue date.
Buying Through a Broker
You don’t have to use TreasuryDirect. Most major brokerages let you participate in Treasury auctions from your brokerage account, and many also sell notes on the secondary market at prevailing prices. You place a non-competitive or competitive bid before the auction deadline, and the security settles into your brokerage account on the issue date.
The brokerage route has practical advantages. Selling before maturity is far simpler because you can trade immediately rather than transferring the security out of TreasuryDirect first, and your Treasuries sit alongside your stocks in a single portfolio view. The downside is that some brokers charge a small commission or markup on secondary-market bond trades, whereas TreasuryDirect charges nothing.
Selling Before Maturity
You aren’t locked in for the full decade. If you need your principal sooner, you can sell your note on the secondary market at whatever price it fetches.
One timing rule matters: notes bought through TreasuryDirect must be held at least 45 calendar days after the issue date before you can transfer them out. That holding period doesn’t apply to notes acquired through reinvestment of a maturing security.1TreasuryDirect. Buying a Treasury Marketable Security
To sell a note held in TreasuryDirect, you first transfer it to a broker or dealer. Start in ManageDirect, select the security, and choose External Transfer. You then complete FS Form 5511, the TreasuryDirect Transfer Request. The form must be signed in front of a certifying officer at a bank, credit union, or trust company; notarization by a notary public is not accepted.6TreasuryDirect. Transferring From One System to Another The officer imprints an official seal, which can be a Signature Guarantee stamp, a corporate seal, or a Treasury-approved Medallion Program stamp.7TreasuryDirect. FS Form 5511 – TreasuryDirect Transfer Request Once processed, the note appears in your brokerage account and your broker handles the sale. If the note is already at a brokerage, you skip the 5511 paperwork entirely.
Reinvesting at Maturity
When your 10-year note matures, TreasuryDirect can roll the proceeds into a new security of the same type and term if you elect the reinvestment option. You can set this at the time of purchase or any time before the note enters its closed-book period near maturity.8eCFR. 31 CFR 363.205 – How Do I Reinvest the Proceeds of a Maturing Security Held in TreasuryDirect?
For 10-year notes, you can schedule one reinvestment. If the maturing proceeds don’t cover the full price of the replacement note, the Treasury tries to pull the difference from your linked bank account or your zero-percent certificate of indebtedness. If that fails, the reinvestment is canceled and your matured proceeds go back to your bank.1TreasuryDirect. Buying a Treasury Marketable Security
Taxes on Your Interest
The semiannual interest payments are taxable as ordinary income at the federal level in the year you receive them.9Internal Revenue Service. Topic No. 403, Interest Received TreasuryDirect posts a Form 1099-INT in your account by January 31 of the following year showing the total interest paid.10TreasuryDirect. 1099 Tax Statements for Paper Savings Bonds and TreasuryDirect If your total taxable interest from all sources tops $1,500 for the year, you’ll report it on Schedule B of Form 1040.11Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends
Treasury interest is exempt from state and local income taxes under federal law.12Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation The exemption covers coupon payments but not estate or inheritance taxes. In a high-tax state, that makes the effective after-tax yield on a Treasury note meaningfully better than a comparably rated corporate bond taxed at both levels.
If you sell a note before maturity for more than you paid, the profit is a capital gain; if you sell for less, it’s a capital loss. Notes held more than a year qualify for long-term capital gains rates; notes held a year or less are taxed at your ordinary income rate.13Internal Revenue Service. Publication 550 – Investment Income and Expenses The state and local exemption applies only to the interest, not to any capital gain on a secondary-market sale.
Risks Worth Knowing Before You Buy
Treasury notes are considered among the safest investments in the world because the chance of a U.S. government default is extremely low. Safe isn’t the same as risk-free, though, and two risks matter for a 10-year note.
Interest rate risk is the larger one. Bond prices move opposite to interest rates. If rates rise after you buy, the market value of your note drops because newly issued notes offer a better yield, and the longer the time to maturity, the more sensitive the price.3TreasuryDirect. How Auctions Work None of this matters if you hold to maturity, because you still receive full face value. It only becomes a real loss if you sell early at a depressed price.
Inflation risk erodes the purchasing power of fixed coupon payments. If inflation runs above your coupon rate for a sustained period, your real return turns negative. The Treasury does sell inflation-protected securities (TIPS) that adjust principal based on the Consumer Price Index, but those are a separate product with a different yield structure.
Name a Beneficiary Before You Buy
TreasuryDirect lets you register marketable securities in your name alone, with a secondary owner, or with a beneficiary. If you name a beneficiary, the security passes directly to that person at your death and bypasses probate. A secondary owner becomes sole owner in the same way.14TreasuryDirect. How Do I…? Entity accounts can’t use either designation. Adding one when you set up the account takes a couple of minutes and can save your heirs significant paperwork.