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 | 3517518 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 | 3517525 Stackers
Stackers's picture

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

Wed, 05/01/2013 - 09:52 | 3517533 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 | 3517580 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 | 3517618 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 | 3517687 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 | 3517721 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 | 3517763 bania
bania's picture

Floaters in the pool!

Wed, 05/01/2013 - 10:41 | 3517778 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 | 3517834 NotApplicable
NotApplicable's picture

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

Wed, 05/01/2013 - 10:45 | 3517790 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 | 3517671 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 | 3518577 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 | 3517620 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 | 3518280 MFLTucson
MFLTucson's picture

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

Wed, 05/01/2013 - 09:53 | 3517551 Stoploss
Stoploss's picture

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



Wed, 05/01/2013 - 10:09 | 3517641 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 EQUAL the word I'm looming for here? Help me out CNBC and Bloomberg...

Wed, 05/01/2013 - 10:42 | 3517787 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 | 3517520 FieldingMellish
FieldingMellish's picture

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

Wed, 05/01/2013 - 09:52 | 3517545 resurger
resurger's picture

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

Wed, 05/01/2013 - 09:47 | 3517521 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 | 3517529 resurger
resurger's picture

why a FRN! NIR is coming soon?!

Wed, 05/01/2013 - 09:48 | 3517537 buzzsaw99
buzzsaw99's picture

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

Wed, 05/01/2013 - 10:16 | 3517660 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 | 3517677 buzzsaw99
buzzsaw99's picture

those are already negative

Wed, 05/01/2013 - 09:52 | 3517543 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 | 3517546 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 | 3517568 buzzsaw99
buzzsaw99's picture

read. the. article.

Wed, 05/01/2013 - 10:01 | 3517597 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 | 3517650 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 | 3517683 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 | 3517659 buzzsaw99
buzzsaw99's picture

okay, here we go, for the short bus riders:

Wed, 05/01/2013 - 10:26 | 3517692 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 | 3517712 SheepDog-One
SheepDog-One's picture

Oh, it IS the toughest of crowds, no doubt about that. But still this is should have seen ZH in the old days!

Wed, 05/01/2013 - 10:42 | 3517781 fuu
fuu's picture

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

Wed, 05/01/2013 - 11:31 | 3518031 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 | 3517771 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.

Formulas the treasury is using to calculate the FRN's

And some examples provided by the Treasury using past rates

Wed, 05/01/2013 - 11:33 | 3518049 knukles
knukles's picture

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

Wed, 05/01/2013 - 11:42 | 3518138 buzzsaw99
buzzsaw99's picture

My apologies. I didn't realize you wanted a long complicated answer:

Wed, 05/01/2013 - 09:57 | 3517584 Everybodys All ...
Everybodys All American's picture


Wed, 05/01/2013 - 10:28 | 3517729 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 | 3517548 20834A
20834A's picture

OT: WHOA! Connecticut going to track gold buyers? And require dealers to keep a 'general description of buyers'!?


Wed, 05/01/2013 - 09:58 | 3517575 Quinvarius
Quinvarius's picture

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

Wed, 05/01/2013 - 10:44 | 3517795 NotApplicable
NotApplicable's picture

Yer dead?

Wed, 05/01/2013 - 09:58 | 3517576 Quinvarius
Quinvarius's picture

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

Wed, 05/01/2013 - 10:07 | 3517624 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 | 3517996 viahj
viahj's picture

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

Wed, 05/01/2013 - 09:57 | 3517570 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 | 3517595 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 | 3517713 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.

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