Notes and bonds are both very common instruments in the debt market. Unlike the stock market, the debt market deals with documents that promise payment at a future debt. Investors buy these promises instead of ownership in the country. They do not get the benefits of owning shares, but they do come with interest rates that allow money to build up over time, and they can be traded between investors.
Notes are medium-term instruments of debt. They are issued by companies and governments, often individually, for specific amounts, and investors can purchase them. These notes have terms that last between one and 10 years, at which time the amount of the original note is due along with the interest gathered. Debt instruments that last less than one year are known as bills.
Bonds are debt instruments very similar to notes, but with several key differences: Most notably, they last longer, with terms over 10 years long, often lasting as long as 30 years. They have interest rates that tend to be slightly less than notes because of the length of these terms. Bonds are offered by the same institutions as notes, usually businesses and governments.
Notes can be created on a note-by-note basis, especially by companies. This allows these companies to create the notes as they need them, for specific amounts and with specific terms. Bonds, on the other hand, are usually created in sets that are all released at the same time. Notes are also more liquid on the market, and can be bought and sold by investors more easily.
Both bonds and notes can be bought from stable governments, making them some of the most trustworthy types of investment. However, because notes have shorter terms, there is less time for something to go wrong with the governments or companies offering them. This matters to investors, and is one of the reasons that notes are easier to trade on the debt market.
Notes are smaller debt instruments and are available in lesser amounts than bonds. This makes it difficult for large investors to buy significant amounts of debt using only notes. Bonds can be offered with denominations in the millions, making it easier to move large amounts of debt using only a few instruments. Notes can equal a similar amount of debt, but many more of them are needed, more than even most governments create.