Question: What are U.S. Treasury Notes?
Answer: Treasury Notes have maturities of 2, 3, 5 or 10 years and denominations of $1,000. The U.S. Treasury sells Notes at public auction periodically. You bid for the Note by placing a competitive bid or a non-competitive bid.
In the wonderful world of government logic, a noncompetitive bid guarantees you will get the Note. If you issue a competitive bid, you may or may not get the Note. Makes sense, right?
The interest rate for the Note is set at the auction. A competitive bid states what interest rate you will accept. If that happens to be the rate set at the auction, you get the Note. If not, you don’t get the note.
A noncompetitive bid states you will accept whatever rate is set at the auction. This guarantees you will get the Note (assuming the auction is not oversubscribed).
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