Liberty Street Economics — Introduction to the Floating-Rate Note Treasury Security

Introduction

The U.S. Department of the Treasury (Treasury) auctioned its first floating-rate note (FRN) on January 29, 2014. With this auction, Treasury introduced the first new marketable debt instrument since Treasury inflation-protected securities (TIPS) in 1997. The new two-year FRN is a fixed-principal security with quarterly interest payments and interest rates indexed to the thirteen-week Treasury bill. In this post, we will discuss Treasury’s reasons for adopting an FRN as well as the existing FRN markets, expected FRN market participants, and results of the first FRN Treasury security auction.

Liberty Street Economics
Introduction to the Floating-Rate Note Treasury Security

Ezechiel Copic, Luis Gonzalez, Caitlin Gorback, Blake Gwinn, and Ernst Schaumburg, all of the Federal Reserve Bank of New York