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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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.

Stackers's picture

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

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.

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...

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.

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. 

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...

spastic_colon's picture

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

NotApplicable's picture

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

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 ...

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".

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.

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.

MFLTucson's picture

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

Stoploss's picture

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



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...

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.

FieldingMellish's picture

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

resurger's picture

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

Tijuana Donkey Show's picture

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

resurger's picture

why a FRN! NIR is coming soon?!

buzzsaw99's picture

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

Dr. Richard Head's picture

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

Everybodys All American's picture

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

Dewey Cheatum Howe's picture

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

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. 

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.

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."

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.

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!

fuu's picture

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

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

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

knukles's picture

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

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?

20834A's picture

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


Quinvarius's picture

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

Quinvarius's picture

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

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...

viahj's picture

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

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

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.

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.