A
2-year Treasury Note represents debt owed by the United States Treasury to the public. A 2-year Treasury Note is issued with
a defined rate of interest, or coupon rate. The yield of a treasury note is determined during auction purchase. In a noncompetitive
bid, one accepts the yield given at the auction. A competitive bid allows the buyer to specify the yield he or she is willing
to accept, but the bid isn't guaranteed to be accepted.
Every year, holders of the 2-year Treasury Note receive the coupon
rate from the Treasury. After ten years, the 2-year Treasury Note matures and the owner is paid the face value. The percentage
of that total payment that exceeds the 2-year Treasury Note's market price, annualized, is called the yield. When the current
market price for the 2-year Treasury note rises, the yield for the 2-year Treasury Note falls, and vise versa.
U.S. Treasury Bonds and shorter-dated Treasury
Notes can trade in a cash secondary market, however most US Treasury Bonds and other U.S. Government securities are traded
as futures contracts on the CME futures exchange.
