How do Treasury notes work?
It’s easy to mix up Treasury Bills, Notes, and Bonds, and I think that’s what’s happening here. Treasury Bills, which are of maturities up to one year, are sold at a discount. So you would buy at say $95 and when it matured four weeks, thirteen weeks, 26 weeks, or 52 weeks later you would get $100. Treasury bills are sold at a discount instead of making coupon payments. Treasury Notes, which have maturities of 2 – 10 years, and Treasury Bonds of longer maturities, do not sell at a discount at original auction. (Although they may sell at a discount on the secondary market, depending on how rates have changed since the original issue.) The investor pays par value (such as $100) and then receives interest payments at regular intervals. At maturity, the principal amount ($100) is returned.
