Yes, the Treasury is in fact selling notes that float off of its own bills.


The Treasury provided a preliminary term sheet for the floating rate note program that will launch sometime in Q4 or Q1. In addition, they said the first auction would have a 2yr maturity, and that the expected pace of issuance would be $10bn to $15bn per month.

  • A 2yr maturity would be eligible to be purchases by money market funds, but the maturity is a bit long for them from a weighted average life (WALA) perspective. Fortunately, we think another investor base will pick up any slack left from the 2a-7 funds.
  • Bills: Watch the seasonality. As expected, the initial FRNs will be linked to the results of 3m T-bill auctions. But in a modest surprise, the rate will only reset quarterly.