Interest on Treasury notes is paid every six months, on dates set when the note is first issued, and the money lands in the bank or brokerage account linked to wherever you hold the note. The coupon rate is fixed at auction, so each payment is the same dollar amount from the first one through maturity.1TreasuryDirect. Treasury Notes
The Six-Month Schedule and How Dates Are Set
Every Treasury note pays interest semiannually, regardless of whether the term is 2, 3, 5, 7, or 10 years.1TreasuryDirect. Treasury Notes Interest accrues from the note’s “dated date,” which is usually the same day as the issue date. The two can differ in rare cases — if the dated date falls on a Saturday, for example, the issue date moves to the following Monday while interest still starts accruing from the Saturday.2TreasuryDirect. Glossary for Treasury Marketable Securities
Payments fall on the six-month and twelve-month anniversaries of that dated date each year. A note dated March 15 pays on September 15 and March 15 annually until it matures. The exact dates are listed in the auction announcement for each security.3eCFR. 31 CFR 356.30 – When Does the Treasury Pay Principal and Interest on Securities You can also find them on your TreasuryDirect account page or your brokerage statement.
Figuring Out Your Payment Amount
Each semiannual payment equals the face value times the coupon rate, divided by two. A $10,000 note with a 4.5% coupon pays $225 every six months ($10,000 × 0.045 ÷ 2). That amount doesn’t change if market rates move later; the coupon locked in at auction is the coupon you keep for the life of the note.4TreasuryDirect. Understanding Pricing and Interest Rates
The minimum purchase is $100, with additional amounts in $100 increments.1TreasuryDirect. Treasury Notes At that minimum, a 4% coupon pays only $2 twice a year, but the low entry makes it practical to build a position in steps.
How the Payment Actually Reaches You
TreasuryDirect
If you hold the note in a TreasuryDirect account, each payment is deposited electronically into your linked bank account on the scheduled date. When you buy, you can set separate destinations for interest payments and the final maturity payment.5TreasuryDirect. User Guide Sections 211 Through 220 Individual coupons are deposited to your bank; only the maturity proceeds can be scheduled for automatic reinvestment into a new note of the same type and term.
Brokerage Account
When the note is held at a brokerage, the Treasury pays the broker, which credits your account’s cash balance. Most firms post the funds within a day of the official payment date, and the entry appears in your transaction history. From there, the cash can sit, be withdrawn, or be used to buy something else.
What Happens When the Date Falls on a Weekend or Holiday
If a scheduled payment date lands on a Saturday, Sunday, or a day the Federal Reserve System is closed, the payment moves to the next business day. The amount is the same; no extra interest accrues for the delay.3eCFR. 31 CFR 356.30 – When Does the Treasury Pay Principal and Interest on Securities This usually shifts a deposit by one or two days around federal holiday weekends.
Reopened Notes and Buying Between Payment Dates
The first payment on a reopened note (one that shares a CUSIP with an earlier issue) may cover more or less than six months. The Treasury prorates that first coupon to match the actual period between the dated date and the first scheduled payment. Every payment after that is a full semiannual amount.
If you buy a note on the secondary market between coupon dates, you pay the seller for interest that built up between the last payment and your settlement date. That amount, called accrued interest, is added to your purchase price. On the next coupon date you still receive the full semiannual payment, and the accrued interest you paid at purchase offsets the portion the seller earned, so you effectively collect interest only for the days you held the note.
The Final Payment at Maturity
On the maturity date, the Treasury sends one combined payment: the last semiannual interest plus the full face value. A $10,000 note with a 4% coupon returns $10,200 that day, consisting of $10,000 in principal and $200 in final interest. The note is then retired and stops earning anything.3eCFR. 31 CFR 356.30 – When Does the Treasury Pay Principal and Interest on Securities
In TreasuryDirect, scheduling a reinvestment rolls the proceeds into a new note automatically. Without that instruction, the lump sum goes to your linked bank account, where it earns nothing until you do something with it.
Tax Reporting on the Interest You Receive
Interest on Treasury notes is subject to federal income tax but exempt from state and local income taxes.6Internal Revenue Service. Topic No. 403, Interest Received That state and local exemption comes from federal law, which shields U.S. government obligations and their interest from state taxation.7Office of the Law Revision Counsel. 31 USC 3124 – Exemption From Taxation
Any payer that sends you $10 or more in interest in a year must issue a Form 1099-INT.8Internal Revenue Service. About Form 1099-INT, Interest Income TreasuryDirect and brokerages send theirs early in the following year. You report the amount as ordinary income federally, and in most states leave it off the state return. If you bought the note at a notable premium or discount to face value, the tax treatment of that difference can also come into play; a tax professional can walk you through it.