U.S. Treasury notes are fixed-rate debt securities issued by the federal government that mature in two to ten years and pay interest every six months. You can buy them directly through TreasuryDirect for as little as $100, and the interest is exempt from state and local income taxes. They sit between short-term Treasury bills and long-term Treasury bonds, which makes them one of the most straightforward fixed-income investments available to individuals.
Where Notes Fit Among Treasury Securities
The Treasury issues three main types of marketable debt. Bills are short-term, with maturities of four weeks up to 52 weeks; they pay no periodic interest and are sold at a discount to face value, with your return being the difference at maturity. Bonds sit at the long end, currently offered in 20-year and 30-year terms, and pay interest every six months. Notes occupy the middle, giving you a predictable income stream over a meaningful period without locking your money up for decades.1TreasuryDirect. About Treasury Marketable Securities
As of early May 2026, yields were running roughly 3.95% on two-year notes, 4.08% on five-year notes, and 4.45% on ten-year notes. Those figures move daily with market conditions.
Maturity Terms and Par Value
Treasury notes are issued in five specific maturities: two, three, five, seven, and ten years.2TreasuryDirect. Treasury Notes Each note carries a par value, also called face value, which is the amount the government promises to return at maturity. Buy a note with a $1,000 par value and you get exactly $1,000 back at the end of its term, regardless of what happened to interest rates or market prices along the way. The maturity date is set at issuance and does not change.
How Interest Payments Work
Every Treasury note pays a fixed coupon rate set during the initial auction. That annual rate is split into two equal payments six months apart, deposited into your linked bank account.2TreasuryDirect. Treasury Notes A $10,000 note with a 4% coupon pays $200 every six months until maturity.
The coupon rate is not the same as the yield to maturity. The coupon is locked at auction. Yield to maturity reflects your total return if you hold the note to the end, accounting for whether you paid more or less than par. Buy at a discount and your yield to maturity is higher than the coupon; pay a premium and it is lower.
How to Buy Treasury Notes
The most direct route for an individual is TreasuryDirect, the government’s online portal for holding and managing federal securities. The rules governing the system are in 31 CFR Part 363.3eCFR. 31 CFR Part 363 – Regulations Governing Securities Held in TreasuryDirect To open an individual account, you must be at least 18 and legally competent, have a valid Social Security Number, have a U.S. address of record, and have a U.S. bank account at an institution that accepts ACH debits and credits. You’ll link the bank account with its routing and account numbers, set up a password and security questions, and wait a few business days for Treasury to verify your information.
Auction Schedule
Note auctions run on a regular monthly calendar. Two-year, five-year, and seven-year notes are auctioned monthly, as are three-year and ten-year notes, with the ten-year alternating between original offerings and reopenings through the year.4TreasuryDirect. When Auctions Happen (Schedules) A tentative schedule is published each quarter.
Non-Competitive Bidding
Individuals buying through TreasuryDirect must bid non-competitively. That means you agree to accept whatever interest rate the auction produces, and in return you are guaranteed to receive the security. The maximum non-competitive bid is $10 million per auction.5eCFR. 31 CFR 356.12 Competitive bidding, where you specify the yield you’ll accept and risk going unfilled, is available only through banks, brokers, and dealers.
Minimums and Order Placement
The minimum purchase is $100, and you can buy in additional $100 increments.2TreasuryDirect. Treasury Notes After you review your order through the BuyDirect tab, the system schedules it for the next auction. Funds are pulled from your linked bank account by ACH on the day the security is issued.
What Happens After You Buy
Notes purchased through TreasuryDirect are held in book-entry form. There are no paper certificates. You receive a confirmation number, and the security appears in your holdings after settlement.
The 45-Day Hold
You cannot transfer or sell a note out of TreasuryDirect for 45 calendar days after the issue date.6TreasuryDirect. Selling a Treasury Marketable Security The hold also applies when you reinvest a maturing security with new funds. Because the shortest note term is two years, this rule doesn’t shorten your holding period; it just prevents you from immediately flipping a note you’ve just bought.
Automatic Reinvestment
As a note approaches maturity, you can schedule an automatic reinvestment into a new security of the same type and term. Set it up at the time of the original purchase or anytime before the security enters its closed book period, the short window just before maturity when changes are locked. If no matching security is available on your maturity date, the reinvestment is canceled and the proceeds are returned to your bank account. If the new security costs more than the maturing one returned, Treasury debits your linked bank account for the difference; if that debit fails, the reinvestment is canceled and you receive the maturity proceeds instead.7eCFR. 31 CFR 363.205
Selling Before Maturity
You don’t have to hold a note to the end. After the 45-day hold, you can transfer it to a bank, broker, or dealer and sell on the secondary market. The sale price depends on where interest rates have moved: if rates rose after you bought, the note sells below par; if they fell, it sells above par.
To move a note out of TreasuryDirect, complete FS Form 5511, the TreasuryDirect Transfer Request. You’ll need the receiving institution’s wire name, routing number, agent contact information, and the destination account number. Start the transfer through the ManageDirect tab by selecting External Transfer.8TreasuryDirect. Transferring From One System to Another Once the note lands at the broker, they handle the actual sale.
Taxes on the Interest
Interest from Treasury notes is subject to federal income tax but exempt from state and local income taxes. The exemption comes from 31 U.S.C. ยง 3124, which shields federal government obligations from state taxation. The two carve-outs are nondiscriminatory franchise taxes on corporations and estate or inheritance taxes, neither of which affects a typical individual’s interest income.9Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation If you live in a high-tax state, the after-tax yield on a note can compare favorably with a similarly rated corporate bond paying the same coupon.
If you sell a note on the secondary market before maturity, the difference between your proceeds and adjusted basis is a capital gain or loss. If the note was issued at a discount, you include that original issue discount in income as it accrues, which increases your basis over time. Sell between interest payment dates and the portion of the sale price representing interest accrued since the last payment must be reported separately as interest income for that year.10Internal Revenue Service. Publication 550, Investment Income and Expenses
By January 31 each year, TreasuryDirect places your Form 1099-INT in your online account, showing the total interest paid during the prior calendar year. You’ll get an email notification when it’s ready. To find it, log in, click ManageDirect, and select the relevant tax year under Manage My Taxes.11TreasuryDirect. 1099 Tax Statements for Paper Savings Bonds and TreasuryDirect No paper copy is mailed.
What Happens to Your Notes When You Die
How you register the securities in TreasuryDirect determines what happens at death. Individual accounts allow three registration options:
- Sole owner. You are the only person who can manage the securities, and at your death they become part of your estate.
- Owner with beneficiary (POD). You control everything during your lifetime, and at your death the named beneficiary automatically becomes the sole owner, bypassing your estate. The beneficiary must be a person, not an entity.
- Two owners. Both people co-own the securities, and if one dies the survivor becomes sole owner.
Naming a beneficiary is the simplest way to keep notes out of probate. Without one, the transfer process depends on total value. When the redemption value at death exceeds $100,000, formal estate administration is required and the legal representative must open a TreasuryDirect account in the estate’s name. For $100,000 or less, a voluntary representative can handle the redemption or transfer without court proceedings, following an order of precedence that starts with the surviving spouse, then children, then other descendants and relatives.13eCFR. 31 CFR 363.44