U.S. Treasury To Issue First Bonds With Floating Rate

The Treasury Department announced today that the United States offered for auction from January 29 to 15,000 million dollars first bonds whose interest rate floating resets every day.

This is the first offering of a new type of Treasuries since U.S. government offered in 1997 inflation-protected bonds, known as TIPS.

“The floating rate securities add diversity to the current portfolio of the Treasury and help support our goal of saving taxpayer dollars funding the government’s borrowing needs at the lowest cost over time,” said Under Secretary for Internal Finance, Mary Miller.

The U.S. national debt exceeds $ 14 trillion and to maintain operations, the government must constantly borrow.

Since December 2008, the Federal Reserve, as part of its policy to overcome the recession has kept the benchmark interest below 0.25 percent.

Five years later, with signs that the economic recovery that began in July 2009 is strengthening, the Fed has begun to reduce its program of buying Treasury bonds and mortgage securities.

In the real estate market have already started to climb mortgages, and this new type of loan announced today could attract investors concerned about the increase in interest rates.

Miller added that the Treasury has worked for the past three years with other market participants to design a program of floating rate, FRN.

In addition to helping the government finance its operations at a lower cost, these titles should also help broaden the base of investors supporting the efforts of debt management by extending the average maturity of Treasury debt.

In the initial offering of securities of 15,000 million dollars, the Treasury will auction papers maturing in two years, and then expects to auction new titles FRN in April, July and October with two reopenings in the months of each quarter.

The securities will be sold in increments of $ 100 with a minimum purchase of $ 100, and interest payments will be made on a quarterly basis.