floating rate treasury note

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.

floating rate treasury note

Postby gerrym51 » Sun Jun 30, 2013 9:38 am

the treasury is introducing floating rate treasury notes in the fall.

any good reason to use them. just wondering-i'm not knowledgable about treasurys
gerrym51
 
Posts: 1530
Joined: Sat Apr 27, 2013 2:44 pm

Re: floating rate treasury note

Postby Scooter57 » Sun Jun 30, 2013 11:02 am

The concept is attractive, but it remains to be seen what they pay. My guess is because this lowers risk, they will pay even less than the already extremely low treasury yields. I. e Almost nothing.
Scooter57
 
Posts: 715
Joined: Thu Jan 24, 2013 10:20 am

Re: floating rate treasury note

Postby gerrym51 » Sun Jun 30, 2013 11:15 am

Scooter57 wrote:The concept is attractive, but it remains to be seen what they pay. My guess is because this lowers risk, they will pay even less than the already extremely low treasury yields. I. e Almost nothing.


thanks
gerrym51
 
Posts: 1530
Joined: Sat Apr 27, 2013 2:44 pm

Re: floating rate treasury note

Postby joe8d » Sun Jun 30, 2013 10:42 pm

My understanding is that will be a 2 yr duration,interest rates will be based on the 90 day T-Bill, change weekly as per that week's auction,may even pay a slight premium above that rate, compound weekly and be available for as low $100. MMF are expected to be the prime buyers.

I'm not sure all this is finalized yet
All the Best,
Joe
User avatar
joe8d
 
Posts: 3284
Joined: Tue Feb 20, 2007 9:27 pm
Location: Buffalo,NY

Re: floating rate treasury note

Postby Scooter57 » Mon Jul 01, 2013 10:09 am

The 90 day notes are mostly what is currently in the Vanguard Prime Money Market fund, so for now they are paying zilch.
Scooter57
 
Posts: 715
Joined: Thu Jan 24, 2013 10:20 am

Re: floating rate treasury note

Postby joe8d » Mon Jul 01, 2013 10:46 pm

Scooter57 wrote:The 90 day notes are mostly what is currently in the Vanguard Prime Money Market fund, so for now they are paying zilch.


Scooter, I think the FRN is in prepartion for the " normalization " of rates ( the 90 day paying a least the rate of inflation ).
All the Best,
Joe
User avatar
joe8d
 
Posts: 3284
Joined: Tue Feb 20, 2007 9:27 pm
Location: Buffalo,NY

Re: floating rate treasury note

Postby Scooter57 » Tue Jul 02, 2013 7:43 am

I look forward to that day, but don't expect to see it for years. Wouldn't it be nice to have 5 year adjustable Treasuries!
Scooter57
 
Posts: 715
Joined: Thu Jan 24, 2013 10:20 am

Re: floating rate treasury note

Postby magician » Tue Jul 02, 2013 9:34 am

joe8d wrote:My understanding is that will be a 2 yr duration,interest rates will be based on the 90 day T-Bill, change weekly as per that week's auction,may even pay a slight premium above that rate, compound weekly and be available for as low $100. MMF are expected to be the prime buyers.

I'm not sure all this is finalized yet

I suspect that you meant that it will have a 2-year maturity, not a 2-year duration. If rates reset weekly, the (effective) duration should be essentially zero.
Simplify the complicated side; don't complify the simplicated side.
User avatar
magician
 
Posts: 1553
Joined: Mon May 02, 2011 2:08 am
Location: Yorba Linda, CA

Re: floating rate treasury note

Postby joe8d » Thu Jul 04, 2013 10:22 pm

magician wrote:
joe8d wrote:My understanding is that will be a 2 yr duration,interest rates will be based on the 90 day T-Bill, change weekly as per that week's auction,may even pay a slight premium above that rate, compound weekly and be available for as low $100. MMF are expected to be the prime buyers.

I'm not sure all this is finalized yet

I suspect that you meant that it will have a 2-year maturity, not a 2-year duration. If rates reset weekly, the (effective) duration should be essentially zero.


I meant Duration in the traditional sense," lenght of time ", not "Bond Speak". I did figure that would come up :)
All the Best,
Joe
User avatar
joe8d
 
Posts: 3284
Joined: Tue Feb 20, 2007 9:27 pm
Location: Buffalo,NY

Re: floating rate treasury note

Postby magician » Fri Jul 05, 2013 12:23 pm

joe8d wrote:
magician wrote:
joe8d wrote:My understanding is that will be a 2 yr duration,interest rates will be based on the 90 day T-Bill, change weekly as per that week's auction,may even pay a slight premium above that rate, compound weekly and be available for as low $100. MMF are expected to be the prime buyers.

I'm not sure all this is finalized yet

I suspect that you meant that it will have a 2-year maturity, not a 2-year duration. If rates reset weekly, the (effective) duration should be essentially zero.

I meant Duration in the traditional sense,"length of time", not "Bond Speak". I did figure that would come up :)

The original idea of duration – Macaulay duration – is a length of time: the (present-value) cash-flow weighted-average time to receipt of cash.

(Sorry: I've been brainwashed by . . . a large fixed-income management company in (Newport Beach) CA.)
Simplify the complicated side; don't complify the simplicated side.
User avatar
magician
 
Posts: 1553
Joined: Mon May 02, 2011 2:08 am
Location: Yorba Linda, CA


Return to Investing - Theory, News & General

Who is online

Users browsing this forum: acr123, Beliavsky, cfs, Corleone, Dr. No, Exabot [Bot], gkaplan, joe8d, Kevin M, rnitz, Tanelorn, Taylor Larimore, vprabhu, Workinghard and 55 guests