Treasury note - Financial definition
Concise definition of the term Treasury note
Medium-term US government security with an initial maturity comprised between 2 and 10 years. It pays its holder a semi-annual, fixed coupon.
Comprehensive definition of the term Treasury note
Treasury notes, also known as T-notes, are issued with initial maturities of 2,3,5, 7 and 10 years.
Characteristics
| Coupon type | Fixed coupon with semi-annual frequency |
| Accrued interest calculation formula | a = N x c ( d / t )/2 where N = Nominal c = Coupon rate d = Number of days between the last coupon date and the value date t = Number of days in the interest period |
| Day count convention | Act/nAct |
| Face value | 100 USD |
| Quotation mode | Price in fractional format. See the fractional/decimal price format converter. |
| Rating | US government bonds are not subject to ratings by rating agencies. |
Issuance
T-bonds are issued by auction. The issuance of new T-bonds takes place every month, with the exception of 10 year notes, which are issued in February, May, August and November auctions. 10 year T-notes are however also auctioned in reopenings in the auctions which take place in the remaining months. These additional tranches have the same maturity dates, coupons, and payment dates as the initial issue, but different issue date and issue price.
Terminology specific to US Treasury securities
When Issued (WI)
This term designs T-bonds which have been announced but not yet issued. During the period between the announcement date and the issue date, usually one or two weeks, these securities are traded on a when issued base.
On-The-Run and off-the-run
The most recently issued Treasury securities for each maturity are called on-the-run. They are the most liquid securities on the market. The other issues are called off-the-run and, being less liquid, they trade at a higher yield than on-the-runs with the same maturity.
When a new security is issued, it becomes the new on-the-run, and the previous on-the-run for the maturity becomes off-the-run.
When a new security is issued, it becomes the new on-the-run, and the previous on-the-run for the maturity becomes off-the-run.