what is a treasury note 
a treasury note t note for short is a marketable u s government debt security with a fixed interest rate and a maturity between two and 10 years treasury notes are available from the government with either a competitive or noncompetitive bid with a competitive bid investors specify the yield they want at the risk that their bid may not be approved with a noncompetitive bid investors accept whatever yield is determined at auction understanding treasury notesissued in maturities of two three five seven and 10 years treasury notes are popular investments and there is a large secondary market that adds to their liquidity interest payments on the notes are made every six months until maturity the income for interest payments is not taxable on a municipal or state level but is federally taxed similar to a treasury bond or a treasury bill 34treasury notes bonds and bills are all types of investments in debt issued by the u s treasury the key difference between them is their length of maturity for example a treasury bond s maturity exceeds 10 years and goes up to 30 years making treasury bonds the longest dated sovereign fixed income security 2treasury notes and interest rate riskthe longer its maturity the higher a t note s exposure to interest rate risks in addition to credit strength a note or bond s value is determined by its sensitivity to changes in interest rates most commonly a change in rates occurs at the absolute level underneath the control of a central bank or within the shape of the yield curve moreover these fixed income instruments possess differing levels of sensitivity to changes in rates which means that the fall in prices occurs at various magnitudes this sensitivity to shifts in rates is measured by duration and expressed in terms of years factors that are used to calculate duration include coupon yield present value final maturity and call features a good example of an absolute shift in interest rates occurred in december 2015 when the federal reserve the fed raised the federal funds rate to a range 25 basis points higher at that time it had been in the range of 0 to 0 25 but then was changed to 0 25 to 0 50 this increase in benchmark interest rates has had the effect of decreasing the prices of all outstanding u s treasury notes and bonds 5special considerationsin addition to the benchmark interest rate elements such as changing investors expectations create shifts in the yield curve known as yield curve risk this risk is associated with either a steepening or flattening of the yield curve a result of altering yields among similar bonds of different maturities for example in the case of a steepening curve the spread between short and long term interest rates widens as the long term rates increase more than the short term rates if the short term rates were to be higher than any of the longer term rates it would create a condition known as an inverted yield curve thus the price of long term notes decreases relative to short term notes the opposite occurs in the case of a flattening yield curve the spread narrows and the prices of short term notes decrease relative to long term notes 