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Treasury Will Issue Its First Floaters On January 29, 2014
As was long predicted and foreshadowed (and analyzed here previously with the proposed FRN term sheet shown half a year ago), after nearly two years of foreplay with the idea of issuing inflation-friendly floating rate notes, moments ago as part of its refunding announcement, the Treasury announced the first floater issuance in history would take place on January 29, 2014, will have a 2 year tenor, and will amount to between $10 and $15 billion.
From the press release:
Floating Rate Notes (FRNs)
Treasury intends to announce the details of the initial Floating Rate Note (FRN) auction on Thursday, January 23, 2014, with the first auction occurring on Wednesday, January 29, 2014. Settlement of the security will occur on Friday, January 31, 2014.
The FRN is the first new product that Treasury has brought to market in 17 years. The FRN will have a maturity of two years and Treasury anticipates that the size of the first auction will be between $10 and $15 billion.
Specific terms and conditions of each FRN issue, including the auction date, issue date, and public offering amount, will be announced prior to each auction. For more details about the new Treasury FRN product, including a term sheet, FRN auction rules, and Frequently Asked Question, please see:
http://www.treasurydirect.gov/instit/statreg/auctreg/auctreg.htm
In addition, a tentative auction calendar that includes Treasury FRNs can be found at:
http://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Pages/default.aspx
As the TSY further adds in its refunding presentation, in 2014 FRN issuance is expected to amount to $105 billion, or 14% of the total $730 billion in project net borrowings (this number will change), and 20% in 2015 before "tapering" subsequently. Why? Unclear - perhaps by then the expected inflation that was the reason for the arrival of FRNs will be gone...
As posted previously, here is what the Treasury proposes for an indicative FRN term sheet:
Away from the topic of FRNs, the TSY also indicated it will offer $70 billion in new paper to refund $63.5 billion, for net new cash proceeds of $6.5 billion. Recall that a few days ago, the Treasury announced it would increase its cash build by a whopping $60 billion in the quarter, hoping to leave it with $140 billion in total cash by December 31. Which begs the question: is the Treasury, in order to keep net collateral roughly flat in light of no Fed monetizing, now simply issuing more gross debt to build up cash with the proceeds? If so, this would mean that the Treasury and the Fed which is monetizing the bulk of its issuance, have reached a level of synchronicity unseen before, all of it simply to preserve the upward ramp in stocks.
Finally, and as largely expected, the Treasury once again reminded Congress to fix itself promptly (i.e., ignore the enabling impact of the Fed), and to lift the debt ceiling ahead of February 7, 2014.
Debt Limit
The debt limit places a limitation on the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. Raising the debt limit does not authorize new spending commitments; it simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.
The Continuing Appropriations Act, 2014 suspended the debt limit through February 7, 2014. A new debt limit will be calculated on February 8, 2014 in the manner prescribed by the Act. At that time, Treasury will have extraordinary measures available, which will allow the government to continue to finance its obligations for a period of time.
During the recent debt limit impasse, concerns that the debt limit would not be increased before extraordinary measures were exhausted led to significant disruptions in the secondary market for short-dated Treasury securities and a measurable increase in borrowing costs for newly issued Treasury bills. As such, Treasury respectfully urges Congress to provide certainty and stability to the economy and financial markets by acting to raise the debt limit well before February 7, 2014.
Good luck with getting a functioning congress as long as the Fed is around.
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So does this effectively mean, that in order to get anyone interested in buying trash, they will have to offer a rate that "floats" alongside inflation, as to help give investors confidence. And in doing so, isn't this a form of admitting that inflation will/may become a problem in the future?
No, it means if no one buys this 2 year junk, the shorty's interest will rise and that means no confidence in the 2 year, we need more interest at a shorter duration to bite this hook.
We are all saved! Now I can issue a few floaters as well! ;-)
Looney
So government is now taking out ARM loans ? .......... what could possibly go wrong .......
You stole my comment! But no, exactly right, and for the same reasons.
Interest rates go up on ARM's because the debt is
1. unsecured
2. risky
a.the debtor is unreliable
b the debtor has no visible means of income
c. the debtor already has an unsustainable debt load
All of these things were true during the run-up to the 2008 mortgage crisis. They are equally true for the US govt. When we see floaters chopped up into tranches and sold piecemeal downstream to Ma and Pa investors, we will know it is exactly the same. Also, someone please keep an eye oin the derivatives market for this excrement.
Big Q: If the interest rate on floaters screeches into the stratosphere, will that put pressure on the fixed rate bills to go up? (I reveal my ignorance of all things having to do with economics.)
float down the river with out a paddle...
to da sea of lquidity-nervana place of all good in sea of debt!
land ho-where is the land, this salt water a tad brakish...
i'm thirsty! damn, we out of water-now what?
I've issued better floaters.
Haha.
I'm gonna drop a few floaters in the toilet bowl to pay hommage to the assholes at the Fed.
I've already issued one this morning.....who wants to bid??
Shit that pays interest in shit... damn that really is just like what the Treasury "issues"!!
Exactly, especially since everyone has sold their TIPS because they recognize that the governments measure of inflation is bogus.
Is this the part where the FED has to go back and read 5 years of ZH to figure out what to do next???
Ben Bernank: wha? you got me at "read"
They are providing a way for people with means (white shoe crowd, Bill Gross, etc) to make themselves immune to coming rate hikes.
Is The Treasury's Imminent Launch Of Floaters The Signal To Get Out Of Dodge?
Thanks.
You clearly don't understand how "mark to fantasy" works. Using this accounting method, anything can be collateral.
for the stupid --> /s
Death knell.
WAIT JUST A SECOND!!
The Treasury has been issuing "Floaters" for years...Treasury-issued Turds should have SUNK to the bottom...years ago...
When I hear the term "floater", I think of a turd in the punch bowl. Guess I'm not far off, eh?
Its been issuing "floaters" for decades. Flush already!
a doodie in the pool will float too.
and Bill Murray will eat it
...............(((((REDACTED SPREADSHEETS)))))))))
Boycott the treasury FRN"s
Also called Ponzi-floaters. Ticker PFII
BYO Charmin.
How do you get a market off crack? Lure it away with amphetamines.
The economic United States of JOHN BELUSHI...
http://www.autopsyfiles.org/jbelushi.htm
SPEEDBALLIN, BITCHEZ!
FRNs are a new inflation-friendly product ? ...that's funny. Can't say these kleptocrats don't have a sense of humor.
Good luck with getting a functioning congress as long as the democrats and republicans are in charge.
Our economic problems are a directly result of our politicians.
Throw the bums out ... all of them.
"Good luck with getting a functioning congress as long as the bankers are in charge." - fixed. Unless you shut down K-street and the money connecion, it won't matter.
Shutting down the banksters and k street is a political problem.
It all starts with enforcing the law.
It starts with holding politicians accountable.
"It starts with holding politicians accountable."
And how do you do that exactly when they have legislated themselves above the "law"?
That's my point (which you clearly don't understand) they have manipulated the "laws" such that nothing they do (no matter how criminal) is not "illegal".
Our forefathers knew the answer, the only answer.
promptly pull your head out of your ass.
Nice words, but you still voted for Boozman didn't ya.
I don't think 'throwing them out' is any more scary for them than getting thrown in the briar patch was for Brer Rabbit....they just go off and hustle more money as lobbyists.
Set an example, hang banksters+politicians....it's the only way to make them behave.
correct, without real consequences that actually impact their life and lifestyle, nothing changes. I second your motion, roll the motherfucking guillotines and let's re-establish the rule of law. We can do now, collectively, or the laws of Nature and Physics will do it for us.
I always associated guillotines with a Reign of (State-sponsored)Terror, not with the Rule of Law.
The Rule of Law would work like this:
A Constinental Congress would be formed, with representatives from all the States. It would draw up a Resolution of Nullification, effectively nullifying the current Government of the United States, lawfully and with due process, according to the principles laid out in the Declaration of Independence. It would establish rules for new elections for Congress and the Executive, and hopefully revoke the charter for the Federal Reserve. Having lawfully and Constitutionally affirmed itself as the Legislative Branch, it would then lawfully assume control over the Armed Forces.
Obviously this would precipitate a civil war. At the end of the conflict, the US would either become a sane, lawfully constituted republic with little or no global power, and a sane econmic system with benefits for all people if they are sober and industrious....or it will become a megamanical monster terrorist state with no checks and balances at all...
Bullshit. Once those in power have changed the "laws" such as nothing they do is "illeagal" (no matter how crimminal), there is ony one path to follow. we can proceed as rational beings recognizing fraud as such or let the laws of Nature and Physics have their way with us. Since its a "global marketplace" now, all I can say is "your move humanity". In all honesty, the laws of Nature and physics really don't give a shit either way. hell, the dinosaurs still had a much better run, in fact the humans aren't even on the same scale yet.
In a "debt is money" system, sovereign debt must increase, period. Once the whole world is on board (forced or otherwise), then the rubber can meet the road and we get to see the true outcome from a world that can create money/credits out of thin air with the click of a button while the calories required to actually do or create anything of cannot. The bankers want hyperinflation and by god they will get it, even if they have to drive real interest rates to sub-zero...
recognize that true inflation has been hidden for many years now and hedge accordingly.
Is this as bad as it sounds?
Well, it stinks worse than it smells.
'Floaters'....great name for these turds. I'm sure when they go belly-up we'll have to double down rescue efforts for these pieces of crap paper as well. Screw the 7th generation, it's easy!
The only problem with these securities is you and I won't be able to get any.
Not at a reasonable price, anyway.
HAAAH! HAHAhahaha!
FRN's! 'FLOATING RATE NOTES'! FEDERAL RESERVE NOTES!
I love the part about the minimum daily interest accrual set at ZERO POINT ZERO ZERO ZERO!
I suppose one could state that the Titanic is still afloat...floating on the surface of the BOTTOM OF THE ATLANTIC!
HEY, GREAT IDEA! Adjustable Rate Mortgages of GOV'T DEBT!
How they gonna BACK this shit? DERIVITAVES of bets on 'BAMACARE?
I mean, SERIOUSLY!?!~
"How they gonna BACK this shit?" - You clearly don't understand "mark to fantasy" accounting, where collateral can be anything you want.
Floaters are always hard to flush down the toilet...
Exactly my thought. Too much fiber, not enough protein.
Actually they are indicative of too much fat in your diet. Fiber absorbs water and sinks.
Floaters
On government inflation figures...............
They will sink not float
Considering the fact that everybody and their brother is pushing floating rate notes these turds will probably be well recieved.
Why buy bonds at all?
Same stuff as the floating mass of Americas coast.
Are thease for the Japs to buy?
The nip and the Hun do not want floaters...
I"m going to release my 16,790th floater after I finish my second cup of black coffee, but that is a conservative estimate.
backed by a $2bn bit-coin
FED bribery of Congress bitchez.
So we are not going to print ourselves out of this after all.
WE WILL DEFAULT BABY. HELL YEAH.
LOL. How stupid do they think people are? I wonder what the interest rate will be when the maturity date hits? 0.0001%?
>>>
...in 2014 FRN issuance...14% of the total
<<<
Well, that's an interesting number.
Personally, I think that the number is either less than 5%, or 100%.
Unfortunately, with a substantial portfolio already, I doubt the Chinese will be interested...
A "floater" is a common term for what one leaves in a toilet after a bowel movement. This is a great choice of name for this instrument.
Und you must flush twice, ya.
There was a time when the conspiracy theorists on ZH, the grumpy Gus's who talked of deliberate infliction of harm on our economy and country - I dismissed them.
No more. I don't believe Bernanke is stupid. I don't believe he is incompetent.
That leaves malfeasance.
Welcone, SnatchnGrab, to the ranks of reality theorists. But "malfeasance" is such a gentle term, usually only punishable under civil law. I would prefer genocide or crimes against humanity.
And these will be more attractive than TIPS because...?
I issued some floaters just yesterday.
Took 3 flushes of one of those newfangled low-flow valves to send 'em on their way.
A floater is NYC cop talk for an East River cadaver after a day or two. Responsible for the othe term - concrete shoes, a common NYC accessory of people who displease TPTB. Better to put those floaters in a JP Morgue refrigerator before the stink overcomes you.
This has to be the quickest way to blow up the government. Wait till investors/governments realize they can affect the rate of their return. T-minus 10, 9, 8, 7, 6, ....
Who buys these floaters? It looks like there will be a transfer of wealth from the taxpayers to the holders with an escalator clause. Even if there is an interest rate cap, there is no limitations with this government on total issuance.
What is the advantage of these over short term CDs' or money market act? Interest paid is linked to the 13 week Treasury Bill. Real inflation is over 6% anyways.
The High Rate from a 13-week Treasury bill auction asannounced by the Bureau of the Public Debt, converted to asimple-interest moneyarket yield on an actual/360 basi
Here's a thought: let's END THE FED since their charter runs-out Christmas Eve, 2013. You know, that 100 year charter that numb-nuts Woodrow Wilson signed into law!
Yeseree' gettem' right here, the new, improved, sustainable, safe FRNs. You buy'em, we set the rate.