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Treasury Issues Draft Floating Rate Note Term Sheet

Tyler Durden's picture





 

As we reported well over a year ago coupled with some subsequent thoughts on what the inevitable launch of floating rate notes (FRNs) by the US Treasury means for the US bond market, we now learn that the launch of FRN Treasurys is imminent and the first US FRN note may come to the public as soon as a few months from now. As the Treasury's refunding statement issued moments ago announced, "we plan to issue a final rule on floating rate notes in the coming months, with the first FRN auction estimated to occur in either Q4 2013 or Q1 2014.  This timeframe reflects Treasury's best estimate for implementing required auction regulations and IT systems modifications. Treasury will provide additional information regarding the timing of the first auction at the August refunding."

Treasury adds: "Treasury has reviewed the comment letters that were received in response to the Advance Notice of Proposed Rulemaking (ANPR) published on December 5, 2012.  We have decided to use the weekly High Rate of 13-week Treasury bill auctions, which was described in the ANPR, as the index for Treasury FRNs."

So much for Libor.

Below is the full sample term sheet provided by the Treasury on what to expect quite shortly out of Jack Lew's department:

 


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Wed, 05/01/2013 - 09:43 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

There simply is no end to the tricks the Ponzi masters can and will use to keep the Ponzi ship afloat......even as it sinks below the waves.

Wed, 05/01/2013 - 09:45 | Link to Comment Stackers
Stackers's picture

Adjustable Rate Sub-prime government bonds ...... what could possibly go wrong.

Wed, 05/01/2013 - 09:52 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Power NEVER willingly relinquishes its hold on power. NEVER! Power must be pried from their (sometimes cold dead) hands.

That does not mean force must be applied. If a majority of people wanted this farce to end it would all end quickly. The King serves at the behest of his court and WE are the King's court.

Wed, 05/01/2013 - 09:57 | Link to Comment disabledvet
disabledvet's picture

Indeed. "We the People"'(meaning literally ALL of us) "are merely an entertaiment device." for whom I'm still trying to figure out...but if you want to wrought out evil sometimes you gotto go over to the dark side. Zero Hedge bitchez...

Wed, 05/01/2013 - 10:07 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Necessity will drive most people and any dependable tribes to aquire things for themselves and keep the local political puppets in check.  All economies are indeed local.  Make all the decrees you want in Washington D.C.  States like Texas, Utah, Arizona and New Mexico don't give a shit and are preparing to do their own thing anyway.  The "official market" will become less and less relevant as the world heads into war, again.  Chance will always favor the prepared, hedge accordingly.  Guess those progressive fucks should have let all those private companies fail and the bond holders, shareholders, and owners take the loss after all.  Fucking morons.  Real consequences for bad behavior motherfucker.  your system had better insure this or the laws of physics and Nature will.

Wed, 05/01/2013 - 10:20 | Link to Comment BobPaulson
BobPaulson's picture

Not sure how local we are free to be as we converge to a centrally controlled currency. It all circles back to who can print money and give it to themselves. I have yet to observe a good or service that cannot be bought at the right price. Division by infinity means the printers own everything and you are just holding it for them. Until their ability to use currency to confiscate everything and undermine the conceot of ownership is curtailed, I don't see a happy endgame. It may be a few years away but this game ends in conflict. I think it takes starvation or people seeing their kids harmed by the system before the proles rise up. 

Wed, 05/01/2013 - 10:26 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Bullshit, I have exchanged produce and silver for goods and services locally.  Do it all the time.  Starvation is indeed already a motivator, long sharecropping...

Wed, 05/01/2013 - 10:38 | Link to Comment bania
bania's picture

Floaters in the pool!

Wed, 05/01/2013 - 10:41 | Link to Comment spastic_colon
spastic_colon's picture

"reviewed the comment letters......"  so from their largest customers, China and the Fed, and they both voted for FRN's

Wed, 05/01/2013 - 10:50 | Link to Comment NotApplicable
NotApplicable's picture

I'm losing track here... are these bonds smoke, or mirrors?

Wed, 05/01/2013 - 10:45 | Link to Comment SilverMaples
SilverMaples's picture

FRN treasuries are ...

Let me borrow some money from you where "I" decide how much interest I pay you at a future date

Ho, and why use LIBOR when we got the FED? Hooo right! Zero interest rates forever, hedge accordingly ...

Wed, 05/01/2013 - 10:46 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"WE are the King's court." - and we are tired of paper fucking promises and an utter lack of accountability, roll the mother fucking guillotines, time for the king's "haircut".

Wed, 05/01/2013 - 13:04 | Link to Comment Totentänzerlied
Totentänzerlied's picture

Who's we?

Your fellow sheeplemericans, and the rest of the world too, are in thrall with their kings and their courts and the entire state apparatus in theory and in practice, and, generally speaking, always have been, even if they may not like the person of the king at any given moment, in basically the same way one might not like the latest actor chosen to play James Bond. They don't know what "paper promise" means and they could not care less about accountability, which most of them can't even spell.

Wed, 05/01/2013 - 10:06 | Link to Comment oleander garch
oleander garch's picture

Dude, just imagine the commissions we'll be getting from all the swaps we are going to write against these floating interest ate Treasuries!  The municiicpal and state swap market is going to blow up soon.  Timing could not be any better!

The future is so bright I am wearing sunglasses at night.

Wed, 05/01/2013 - 12:08 | Link to Comment MFLTucson
MFLTucson's picture

Why bother with names when they are the only buyers of this crap?

Wed, 05/01/2013 - 09:53 | Link to Comment Stoploss
Stoploss's picture

Aww, they're trying to put some risk in the bond market..

 

LOL!!!

Wed, 05/01/2013 - 10:09 | Link to Comment disabledvet
disabledvet's picture

So what's the difference between an an FRN (floating rate note) and an FRN? (Federal Reserve Note or "cash money"? They all seem..is EQUAL the word I'm looming for here? Help me out CNBC and Bloomberg...

Wed, 05/01/2013 - 10:42 | Link to Comment NotApplicable
NotApplicable's picture

New version of the same ole trick?

It's like a dog that grows a new tail each time the last one fails to wag him anymore.

Wed, 05/01/2013 - 09:47 | Link to Comment FieldingMellish
FieldingMellish's picture

Will go nicely with the zero coupon FRNs currently issued by the Fed called $.

Wed, 05/01/2013 - 09:52 | Link to Comment resurger
resurger's picture

zero hedge will have no shortage of moar ponxi when Jack Jew takes over

Wed, 05/01/2013 - 09:47 | Link to Comment Tijuana Donkey Show
Tijuana Donkey Show's picture

I sense a disturbance in the force, as if a thousand bankers shouted out, then were silenced. 

Wed, 05/01/2013 - 09:49 | Link to Comment resurger
resurger's picture

why a FRN! NIR is coming soon?!

Wed, 05/01/2013 - 09:48 | Link to Comment buzzsaw99
buzzsaw99's picture

A 2y note with a 13 week rate. lolololololololololololololol!!!!!!!!!

Wed, 05/01/2013 - 10:16 | Link to Comment Dr. Richard Head
Dr. Richard Head's picture

They should be issuing 15 minute rates being that Bernanke can handle all of that in minutes.

Wed, 05/01/2013 - 10:20 | Link to Comment buzzsaw99
buzzsaw99's picture

those are already negative

Wed, 05/01/2013 - 09:52 | Link to Comment Everybodys All ...
Everybodys All American's picture

If that doesn't get another ratings downgrade of the US debt nothing will.

Wed, 05/01/2013 - 09:51 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Excuse my ignorance but who and how are the floating rates determined?

Wed, 05/01/2013 - 09:54 | Link to Comment buzzsaw99
buzzsaw99's picture

read. the. article.

Wed, 05/01/2013 - 10:01 | Link to Comment Tijuana Donkey Show
Tijuana Donkey Show's picture

Buzz, no one reads in America, you know that! Remember that 1/4 of all high school grads are functionally illiterate above a 4th grade level. Put this sucker on YouTube, and people might understand. 

Wed, 05/01/2013 - 10:15 | Link to Comment Joe Davola
Joe Davola's picture

Can't tell whether it's the Scribd plugin or they used the run-on font, but that thing's hard to read.

Wed, 05/01/2013 - 10:19 | Link to Comment FieldingMellish
FieldingMellish's picture

Tyler pointed it out in the lead-in: 

We have decided to use the weekly High Rate of 13-week Treasury bill auctions, which was described in the ANPR, as the index for Treasury FRNs."

Wed, 05/01/2013 - 10:17 | Link to Comment buzzsaw99
buzzsaw99's picture

okay, here we go, for the short bus riders: http://www.youtube.com/watch?v=qGLglMOdjak

Wed, 05/01/2013 - 10:26 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Jesus fucking christ ask a simple question. Tough crowd. Point taken though. God forbid you try to learn something and ask a simple question to get pointed in the right direction. I got what I needed anyways after rereading just need to find the correct formulas. I am just trying to determine how they are going to rig this one like Libor.

Wed, 05/01/2013 - 10:25 | Link to Comment SheepDog-One
SheepDog-One's picture

Oh, it IS the toughest of crowds, no doubt about that. But still this is nothing....you should have seen ZH in the old days!

Wed, 05/01/2013 - 10:42 | Link to Comment fuu
fuu's picture

In the old days people actually answered questions and educated people.

Wed, 05/01/2013 - 11:31 | Link to Comment knukles
knukles's picture

I dunno, I been tellin folks for years to either do your own due diligence, read the article, learn English ex-Ebonics, get a life or grow up....
Ah, the good olde days
:)

Wed, 05/01/2013 - 10:41 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Here is the full 6 page draft dated 2012 of that scribd document including the methodologies and formulas they are using to determine the discount rates. How about that for reading assholes and finding your own answers that are missing from the above scribd document and article. The information is incomplete but you should know that since you people read it already.

https://www.treasurydirect.gov/instit/statreg/auctreg/ANPR2012.pdf

Formulas the treasury is using to calculate the FRN's

https://www.treasurydirect.gov/instit/statreg/auctreg/ANPRFRNformula.pdf

And some examples provided by the Treasury using past rates

http://www.treasurydirect.gov/instit/statreg/auctreg/DMCalc.xlsm

Wed, 05/01/2013 - 11:33 | Link to Comment knukles
knukles's picture

See, doing one's own research is rewarding and builds self-esteem

Wed, 05/01/2013 - 11:42 | Link to Comment buzzsaw99
buzzsaw99's picture

My apologies. I didn't realize you wanted a long complicated answer: http://www.walkingrandomly.com/images/random/walking_randomly_equation.gif

Wed, 05/01/2013 - 09:57 | Link to Comment Everybodys All ...
Everybodys All American's picture

auction.

Wed, 05/01/2013 - 10:28 | Link to Comment savagegoose
savagegoose's picture

so a $5 mill min  bond purcase, 50 000  initial purchase @ $100 , i can offer....  10c.  where do i type in my bid?

Wed, 05/01/2013 - 09:50 | Link to Comment 20834A
20834A's picture

OT: WHOA! Connecticut going to track gold buyers? And require dealers to keep a 'general description of buyers'!?  http://www.activistpost.com/2013/04/connecticut-begins-gold-dealer-shutdown.html?m=1

 

Wed, 05/01/2013 - 09:58 | Link to Comment Quinvarius
Quinvarius's picture

You know what happens right after "then they fight you"?

Wed, 05/01/2013 - 10:44 | Link to Comment NotApplicable
NotApplicable's picture

Yer dead?

Wed, 05/01/2013 - 09:58 | Link to Comment Quinvarius
Quinvarius's picture

You know what happens right after "then they fight you"?

Wed, 05/01/2013 - 10:07 | Link to Comment Shell Game
Shell Game's picture

Of course they are!  The divided Stalinist States of Merika are splitting into the Unicorns For All states and the Hell Yes, Manufacture Your Guns Here states.  

Anything that threatens the Dollar is a National Security Risk, anything that is in shortage is a National Security Risk - the unicorns must flow...

Wed, 05/01/2013 - 11:24 | Link to Comment viahj
viahj's picture

can an entire state go 'Detroit'?  we'll see.

Wed, 05/01/2013 - 09:57 | Link to Comment youngman
youngman's picture

Like I would trust the bench mark as being a true benchmark....that TPTB could not play with it somehow....yeah right..I just bought some swampland in Florida...but I at least new it was swamp land first...or was it a bridge in Brooklyn

Wed, 05/01/2013 - 10:03 | Link to Comment Juggernaut Nihilism
Juggernaut Nihilism's picture

Endgame.  Interest rates are going up.  Other bottom indicators include Apple choosing now to issue their bonds.  When interest rates go up, batten down the fucking hatches.

Wed, 05/01/2013 - 10:24 | Link to Comment FubarNation
FubarNation's picture

I do believe then when (and I dare say if) interest rates rise to 'free market' values we will witness the largest clusterfuck/shitstorm that humankind has ever witnessed.

Wed, 05/01/2013 - 11:29 | Link to Comment viahj
viahj's picture

nah, it would just be the end of the PetroDollar, Yen and Euro.  all others are already enacting plans for this enventuality.

Wed, 05/01/2013 - 13:45 | Link to Comment andrewp111
andrewp111's picture

Rates are never going up again. But that clusterfuck/shitstorm is still going to happen as QE is already well past the point of diminishing returns.

Wed, 05/01/2013 - 10:07 | Link to Comment Dr. Engali
Dr. Engali's picture

This is pretty curious timing with the Bernank heading out the door. I hope people are moving out of their long dated bonds before the herd starts to stampede.

Wed, 05/01/2013 - 10:11 | Link to Comment LawsofPhysics
LawsofPhysics's picture

You are an optimist.  the "herd" is complacent.  Moreover, what exactly are they going to "stampede" into?  Do tell...

Wed, 05/01/2013 - 10:17 | Link to Comment Dr. Engali
Dr. Engali's picture

They aren't going to be so complacent when rates start going up, and floating rate bonds are a signal that they are. Or at least they are expecting them to. I would like to say that the herd would head into precious metals, but I doubt that the paper pushers will have the common sense to do so. Hell who knows TPTB might manufacture some crisis to keep enough fear in the sytem so the sheep stay in bonds.

Wed, 05/01/2013 - 10:21 | Link to Comment fonzannoon
fonzannoon's picture

Okay now you are confusing me :)

Didn't you just say rates will never go up?

Look at Libor Doc. a bunch of douchebags bought each other champagne and rates all over the world stayed down.

To say rates will rise is to say the stock market will have a correction. Neither will happen. We have passed that option. We have passed through the event horizon. What happens next, if it even happens at all, is the mother of all flash crashes, and in a nanosecond it's game over.

Wed, 05/01/2013 - 10:22 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Just another walking contradiction, see my post below.  No ways rates can go up without blowing up the American ponzi and the Federal Reserve Bank. It is a "bait and switch".

Wed, 05/01/2013 - 10:29 | Link to Comment Dr. Engali
Dr. Engali's picture

I do feel that rates can't go up without killing the system, but what other reason do you use a floating rate note unless you expect rates to go up? I guess the buyers could be people who expect rates to go up, but get suckered into a product that doesn't perform like they anticipate. The fed keeps pressure on rates and the floating rate bonds do nothing.

Wed, 05/01/2013 - 10:31 | Link to Comment fonzannoon
fonzannoon's picture

My guess is they don't care what you or I expect. The only thing that matters is you continue to lend them money cheap so they can perpetuate this mess another day. Ask people who owned floating rate bonds a while back how it worked out. Those fuckers manipulated LIBOR forever and there were no reprecussions. Why would there be when these bonds go nowhere?

 

 

Wed, 05/01/2013 - 10:23 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Please, history is very clear on such bonds, floating rate bonds means they will advertise a positive rate and then (after the herd jumps in) they will change the rate (hence the floating rate) to a negative yield.  That's the wholoe fucking point, no set rate, they can change it whenever they like.  You really think it would be changed to benefit the fucking herd?  Again, you are being an optimist.

Wed, 05/01/2013 - 10:32 | Link to Comment Dr. Engali
Dr. Engali's picture

Of course they aren't going to do anything for the herd, but if there is upward pressure on interest rates there won't be a choice but to adjust the rate. The people who buy them are the people who feel that there will be an upward bias on rates.

Wed, 05/01/2013 - 10:50 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"but if there is upward pressure on interest rates there won't be a choice but to adjust the rate."  -  There has been such pressure in the "market" since 2000, yet rates have gone down.  The are no "people buying them", that's the fucking problem!!!!!  There is The Fed, and that's it.  Rates have long since uncoupled from reality, if rates go up, America hard defaults immediately (as aopposed to yet another engineered soft default).  Please doc, where the fuck have you been?  Are you saying America will no hard default?  Bold prediction indeed.

Wed, 05/01/2013 - 10:56 | Link to Comment fonzannoon
fonzannoon's picture

Doc knows the deal. We all do. We are just talking in circles while the band plays and they rearrange the deck chairs around us.

 

Wed, 05/01/2013 - 11:00 | Link to Comment Dr. Engali
Dr. Engali's picture

Where have I been? Where the fuck have you been? I've been pretty consistent with my message. The S&P should be valued around 400...I've stated that since I first joined fight club. I don't think rates can go up, because it would bankrupt the whole system, but I do think that floating rate notes are catering to people who expect the rates to go up. When the market collapses it won't be like 08..the lack of liquidity and short sellers provide no underlying bid and therefore support which will cause the market vaporize. And finally we will see a major war in the next 5 to 10 years. 

Wed, 05/01/2013 - 11:06 | Link to Comment LawsofPhysics
LawsofPhysics's picture

You say "what other reason could their be" yet you can't comphrend this "bait and switch" tactic?  You made the statement not me Doc.  Seems pretty clear to me (and has been done with bunds already) annouce floating rate with initial positive yield, all the sheep jump in, change rate to negative.  Sorry you can't see it.

Wed, 05/01/2013 - 11:11 | Link to Comment Dr. Engali
Dr. Engali's picture

When I say what other reason do you use a floating rate note, I'm talking about the investor side of it. Investors buy floating rate notes when they expect rates to go up. I'm not talking about the issuer, I know they are going to try and screw the investor....that's what they do.

Wed, 05/01/2013 - 13:43 | Link to Comment andrewp111
andrewp111's picture

Yeah, but the Treasury knows that rates are only going down from here. Rates will never rise again in our lifetimes.

Wed, 05/01/2013 - 15:16 | Link to Comment NaN
NaN's picture

Given that the goal of Treasury is to borrow at the lowest cost, they win only if rates never go up, so I think you have a good point.

There is a curious feature where rates are determined by 13 week period, but the instrument itself lasts 2 years. 

 

Wed, 05/01/2013 - 10:20 | Link to Comment SheepDog-One
SheepDog-One's picture

I still don't know even 1 person who owns a gubmint bond.

Wed, 05/01/2013 - 10:22 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Many 401ks and institutional investors (pensions) do.

Wed, 05/01/2013 - 10:23 | Link to Comment fonzannoon
fonzannoon's picture

Do you know anyone with a 401(k)? Anyone with an annuity?

Trust me we are complicit in this ponzi, whether we know it or not.

 

Wed, 05/01/2013 - 10:27 | Link to Comment SheepDog-One
SheepDog-One's picture

As I said, I don't know any single person who themselves bought a UST...the rest of it is all churning in limbo. 

Now, you know I frequently discuss the '401K Bathrobe Brigades', so the fact that this is all just done 3rd hand in some fund or other is no news to me.

Wed, 05/01/2013 - 10:33 | Link to Comment fonzannoon
fonzannoon's picture

well now that you made me actually think about it....I don't know one person either...

I see what you did there.

Wed, 05/01/2013 - 12:28 | Link to Comment noless
noless's picture

i might still have one, Id have to check though, kept it for that very reason, potential collectable..

Wed, 05/01/2013 - 10:49 | Link to Comment NotApplicable
NotApplicable's picture

My patriotic inlaws bought 'em for years and years. Luckily they retired before ZIRP came along.

Wed, 05/01/2013 - 10:13 | Link to Comment fonzannoon
fonzannoon's picture

"The fed minutes released today show a very divided fed commitee. Ben Bernanke stunned the group when he tried to announce his resignation during the meeting. He expressed anger and frustration and smelled of alcohol. He slurred some vulgarities at Senator Chuck Schumer who was not present at the meeting. Janet Yellen slapped Bernanke across the face hard and yelled "Shut up bitch and pull yourself together, Kevin's got this". There was no Kevin at the meeting. At that point Dick Fisher stormed in and tripped over Jim Bullard who was masturbating to a video clip of himself on CNBC and started yelling "I can't get delivery of my GLD! Someone's gonna get their ass kicked up in this place!!"

No formal announcement of any change in policy was officially announced at this time.

Wed, 05/01/2013 - 10:44 | Link to Comment short screwed
short screwed's picture

lmao + 1,000

Wed, 05/01/2013 - 11:16 | Link to Comment DriveByLurker
DriveByLurker's picture

I miss the old days, when the minutes had an almost epic literary quality:

 

http://www.satirewire.com/news/0101/fedrave.shtml

 

 

Wed, 05/01/2013 - 10:04 | Link to Comment Bad Attitude
Bad Attitude's picture

Why do they have to call them "FRNs?" This is just going to cause confusion - Federal Reserve Notes or Floating Rate Notes!

Wed, 05/01/2013 - 11:33 | Link to Comment viahj
viahj's picture

TP

Wed, 05/01/2013 - 11:47 | Link to Comment redpill
redpill's picture

They call them that because they are the same thing since rates will remain zero until this sucker pops and then none of it matters. Therefore it's not any different than holding cash as they would print money to pay off a bond just the same as they would print money to cover your "insured deposit" after FDIC goes bust. We live in a financial world where nothing means anything, an all financial instruments are trending toward absolute correlation. On a long enough timeline...

Wed, 05/01/2013 - 10:07 | Link to Comment Downtoolong
Downtoolong's picture

I don’t think this is going to be much of a game changer unless they extend the term out to longer durations.

If the government really wanted to guarantee its money it would offer TIPS at face value in any quantity to anyone who wanted them and stop taxing the phantom inflationary income. Now that would be a game changer. I bet it would eliminate the excess deposits in savings banks right quick too.  

Wed, 05/01/2013 - 10:07 | Link to Comment 1eyedman
1eyedman's picture

looks like small caps are showing a bit of 'weakness' compared to large caps....dont worry!  we just hit new all time highs yesterday!

Wed, 05/01/2013 - 10:07 | Link to Comment Tic tock
Tic tock's picture

'bout time the Treasury turned up

Wed, 05/01/2013 - 10:12 | Link to Comment blindman
blindman's picture

what? !!!!!
shut up and drive.
keep stacking !
.
Open House at My House by Z Z Hill 0001
http://www.youtube.com/watch?v=fao76CI3rWA

Wed, 05/01/2013 - 10:15 | Link to Comment FubarNation
FubarNation's picture

This will be great. 

 

"Public note holders.  We have decided that the floating rate for your recently purchased FRN note is -ve 10%.  We will be deducting your payment directly out of your bank account.  Thank you."

Wed, 05/01/2013 - 10:13 | Link to Comment Mercury
Mercury's picture

OK, I get the capital loss avoidance regarding outstanding Treasuries but how does this not explode the US Government's borrowing costs and debt service?

Wed, 05/01/2013 - 10:16 | Link to Comment Everybodys All ...
Everybodys All American's picture

bingo.  This action is necessary to avoid balance sheet bankruptcy at the Fed.

Wed, 05/01/2013 - 10:25 | Link to Comment LawsofPhysics
LawsofPhysics's picture

So the Fed is going to stab the U.S. government in the back?  Time to end the fucking fed and have the U.S. military detain every Federal Reserve Board member, confiscate their wealth and all the wealth of the Federal Reserve Bank, then roll the mother fucking guillotines, sound good to me!!!

Wed, 05/01/2013 - 10:30 | Link to Comment blindman
blindman's picture

yea but, the fed is the bad bank stuffed
with fraud and losses.

Wed, 05/01/2013 - 10:42 | Link to Comment Everybodys All ...
Everybodys All American's picture

Co- conspirators. The Fed enables the enormous binge spending by the US Treasury via Obama and Congress. End the Fed absoutely. I know I'm not telling you anything new.

Wed, 05/01/2013 - 10:17 | Link to Comment SheepDog-One
SheepDog-One's picture

I guess news such as 'a gay in the NBA' somehow negate any real world things such as complete bankruptcy and a 0% rate which will never rise.

Wed, 05/01/2013 - 10:16 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

OT...did someone get an early view of the FOMC talks?  Dow is takin' a header even while the USD is weakening...

Wed, 05/01/2013 - 10:17 | Link to Comment AynRandFan
AynRandFan's picture

So these are supposed to cushion a collapsing bond market.  Nice.

Wed, 05/01/2013 - 10:33 | Link to Comment SheepDog-One
SheepDog-One's picture

Step right up, place ya bets! What could go wrong? Everyones a WINNA!

Wed, 05/01/2013 - 10:47 | Link to Comment Yen Cross
Yen Cross's picture

   So let me get this straight. When intrest rates go higher everyone will want FRN's because the face/coupon value stays the same and doesn't fluctuate like fixed rate bonds. So all of the rats will pile from the fixed rate paper into the FRN paper for yield.

   lol, Those kleptocrats have every thieving corner covered!

Wed, 05/01/2013 - 13:39 | Link to Comment andrewp111
andrewp111's picture

It just tells you that the issuer doesn't expect rates to ever go up again. This way, they just keep cutting the interest payments during the bond term.

Wed, 05/01/2013 - 10:47 | Link to Comment WeekendTrader
WeekendTrader's picture

What is the advantage to issueing FRNs for the gvt? It just introduces more uncertainty both for the issues as well as for the buyer?

What am I missing here?

Wed, 05/01/2013 - 11:17 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

If I am understanding this correctly, the Treasury by issuing these will allow the FED to increase the interest rates on fixed bonds while using these FRN's to rig the aggregate rate on payment dates of all Treasurys issued to keep the government from default?

Wed, 05/01/2013 - 11:33 | Link to Comment polo007
polo007's picture

http://useconomy.about.com/od/monetarypolicy/f/fed_monetizing_debt.htm

Question: How Is the Fed Monetizing Debt?

Answer: The Federal Reserve is monetizing debt anytime it buys U.S. Treasuries. The Federal government borrows from individuals, corporations and even foreign governments when it auctions Treasury bills, bonds and notes. When the Federal Reserve buys these Treasuries, it doesn't actually have to print money to buy them. It issues a credit, and puts the Treasuries on its balance sheet. Everyone treats the credit just like money, even though no actual cash is printed.

How does this monetize the debt? It turns the debt into money. It takes those Treasuries out of the open auction, which decreases the supply of Treasuries. This means the remaining Treasuries are bid up higher. Treasuries that are more valuable don't have to pay as much in yield to get buyers. A lower yield drives down interest rates on mortgages. The net effect is that it is as if the Treasuries bought by the Fed didn't exist.

But they do exist on the Fed's balance sheet. Technically, the Treasury must pay the Fed back one day. Until then, the Fed has given the Federal government more money to spend and increased the money supply. This is called monetizing the debt.

The Fed only monetizes debt in an emergency, like a recession. It helps the Treasury increase government spending to stimulate the economy without raising interest rates, which would depress the economy. When the economy improves, then the Fed can reverse the transaction, get the Treasuries off of its balance sheet, and remove the credit from the Federal government's operating budget.

Wed, 05/01/2013 - 11:36 | Link to Comment R_J
R_J's picture

Ok...someone said to READ the report, but...oh well i still dont understand what they will do or how it will effect the outcome.

 

Anyone care to explain?

 

 

Wed, 05/01/2013 - 11:37 | Link to Comment polo007
polo007's picture

http://www.cbc.ca/news/world/story/2013/04/26/f-rfa-macdonald-power-shift-savers.html

Quietly, without much public fuss or discussion, a new ruling class has risen in the richer nations.

These men and women are unelected and tend to shun the publicity hogged by the politicians with whom they co-exist.

They are the world's central bankers. Every six weeks or so, they gather in Basel, Switzerland, for secret discussions and, to an extent at least, they act in concert.

The decisions that emerge from those meetings affect the entire world. And yet the broad public has a dim understanding, if any, of the job they do.

In fact, these individuals now wield at least as much influence over the lives of ordinary citizens as prime ministers and presidents.

The tool they have used to change the world so profoundly is one they alone possess: creating money out of thin air.

There is an economic term for this: quantitative easing. More colloquially, it's called printing money.

Since the great economic meltdown in 2008, these central bankers have probably saved the world's economy from collapse, and dragged it into the unknown at the same time.

The amounts they have created are so vast as to be almost incomprehensible — trillions of dollars in pounds and euros, among other currencies.

At the end of 2012, the balance sheets of the world's largest central banks, those of the G20 nations and the eurozone, including Sweden and Switzerland, totalled $17.4 trillion US, according to Bank of Canada calculations from publicly available data.

What's their legacy?

When the record of the 2008 global financial catastrophe is fully written — that story remains a work in progress — the world's central bankers will emerge either as heroes, or as the people who administered a cure that turned out to be as bad as the disease.

Three of them in particular will go down in history: Ben Bernanke of the U.S. Federal Reserve, Mario Draghi of the European Central Bank, and Canada's own Mark Carney, soon to be the governor of the Bank of England.

That is nearly a quarter of global GDP, and slightly more than double the $8.5 trillion these same institutions were holding at the end of 2007, before the financial crisis hit.

Stock markets have risen on this tide of cheap money. So has real estate. So, arguably, has everything else.

Wed, 05/01/2013 - 11:35 | Link to Comment polo007
polo007's picture

http://www.cbc.ca/news/world/story/2013/04/29/f-rfa-macdonald-power-shift-growth.html

Mark Grant sits on the aft deck of his yacht in South Florida's spring sun, ostentatiously relishing his wealth as only an American does, and dispensing advice. He's made his money, and he likes to wear it.

Grant's personality is as big as his mansion and as flashy as his collection of exotic cars — he actually calls himself "The Wizard," a tribute to his own financial acumen.

While we are talking, his cellphone rings intermittently, and the callers are usually serious moneymen. Bill Gross of Pimco, the world's largest bond agency, is a friend; his praise adorns the dust jacket of Grant's recent book.

Inevitably, the callers are seeking investment advice.

A nearly 40-year Wall Street veteran, Grant is currently the managing director of a Texas-based investment bank and the author of a daily must-read investment commentary called Out of the Box.

His advice these days to tycoons and small investors alike is simple and direct. For heaven's sake, seek safety. Preserve your capital. "Keep what you have."

To Grant, the central banks' money printing has distorted the financial universe beyond any sensible dimensions.

The Federal Reserve alone is churning out $85 billion a month, or just over a $1 trillion a year. The combined balance sheets (which reflect created money) for the European Central Bank and the 17 individual banks of the eurozone stand at $3.45 trillion.

Wed, 05/01/2013 - 11:38 | Link to Comment polo007
polo007's picture

http://www.cbc.ca/news/world/story/2013/04/30/f-rfa-macdonald-monarchs-money-secrecy.html

Hiding the bad news

What these bankers do with this new money they print is buy government debt, or shore up failing banks or teetering national economies or industries like housing or insurance, part of the policy they call quantitative easing.

They say, and many respectable experts support them, that quantitative easing has saved entire economies from imploding.

They also say — high priest-like — that they must keep the details of their discussions secret because their words could be misinterpreted, and entire markets could move on a misunderstanding.

And they stress they are operating entirely within the mandates given them by elected governments.

That's as may be.

It's also true the central bankers did not ask for the immense power they now exercise.

It was thrust upon them because the private sector made enormous, stupid, ruinous blunders, and because elected politicians were too terrified to make all the deeply unpopular decisions, like whether to let more banks fail, that had to be made when the financial meltdown started feeding on itself.

Politicians, given the chance, kick the can down the road; central bankers act.

But because of their mandate to maintain economic stability, they like to hide the bad news, or obscure it with vague euphemisms.

Wed, 05/01/2013 - 11:39 | Link to Comment polo007
polo007's picture

http://www.cbc.ca/player/News/World/ID/2382392338/

The National | Apr 29, 2013 | 20:46

The Monarchs of Money

The world's central banks have printed unimaginable amounts of money in recent years. Neil Macdonald explores what this means for the global economy and for your financial well-being.

Wed, 05/01/2013 - 12:51 | Link to Comment el Gallinazo
el Gallinazo's picture

Bloomberg refers to them as "floaters."  Wonder if they will smell like an East River floater?

Wed, 05/01/2013 - 13:18 | Link to Comment Fix-ItSilly
Fix-ItSilly's picture

Funny how floating rate notes were not made available when the taxpayer would have saved money.  As Thomas Jefferson so ably stated: 

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Wed, 05/01/2013 - 14:19 | Link to Comment NaN
NaN's picture

Are the comment letters public?  Where are they?

 The request for comments:

 

 

 

Commenters are invited to submit views on the following questions:

1. Would FRNs attract new investors into the Treasury market for a sustained period of time?

2. Would a Treasury FRN help meet the investment needs of retail and institutional investors?

3. How liquid would you expect FRNs to be in the secondary markets?

4. What is the ideal structure for a Treasury FRN?

a. What is the ideal final maturity for a Treasury FRN?

b. What are the pros and cons of using the following reference rates for a Treasury FRN: Treasury bills, a Treasury general collateral-based repurchase agreement (“repo”) rate, and the federal funds effective rate? Are there any other reference rates that merit consideration?

c. What would be the appropriate coupon payment frequency of a Treasury FRN?

5. What changes to trading, settlement and accounting systems would be needed to accommodate FRNs?

6. Are there any other operational issues that Treasury should be aware of when deciding on whether to issue FRNs?

7. Given the above considerations, are FRNs a useful debt management tool that Treasury should consider?

 

 

  https://www.federalregister.gov/articles/2012/03/19/2012-6662/public-input-on-the-development-and-potential-issuance-of-treasury-floating-rate-notes 

 

I found this: public comments which contains 16 letters, which appear to be only from big banks and traders.

 

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