new FRN... means floating rate notes... US Treasury will issue them... they say it is because of inflation... here is the information... US Treasury Notes January 29, 2014 US Treasury announced 1st ever issuance of $10-$15 billion inflation-friendly Floating Rate Notes (FRNs) Wednesday, January 29, 2014 1st auction... Friday, January 31, 2014 security settlement... two year maturity... product/ auction date/ issue date/ public offering amount/ term sheet/ auction rules/ Frequently Asked Question prior to each auction at treasurydirect.gov/instit/statreg/auctreg/auctreg.htm... auction calendar at hhtp://treasury.gov/resource-center/data-chart-center/quarterly-refunding/Pages/default.aspx 2014 FRN issuance is expected to amount to $105 billion... 14% of $730 billion in project net borrowings... 2015 FRN issuance $150 billion... 20%... then tapering off... inflation expected to be gone then... TSY 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. DRAFT – Preliminary and Subject to Change Treasury Floating Rate Note Term Sheet I. ISSUER United States Treasury II. ISSUE DATE The last Friday of a calendar month. III. MATURITY DATE Last calendar day of the month two years after the issue date. IV. MATURITY PAYMENT Principal will be paid on the last business day of the maturity month unless that day is not a business day, then interest is paid on the following business day. V. INTEREST DATES Quarterly from the Issue Date, to and including the Maturity Date, on the last calendar day of a month. VI. INTEREST PAYMENTS Interest will be paid on the last business day of the monthunless that day is not a business day, then interest is paid on the following business day. VII. INTEREST: A. ACCRUAL PERIOD From and including the Issue Date or last Interest Date to,but excluding, the next Interest Date. B. INTEREST ACCRUAL In general, accrued interest for a particular calendar day inan Accrual Period shall be the Index Rate from the most recent auction of 13-week Treasury bills that took place before the accrual day, plus the Spread, divided by 360,subject to a minimum of zero. However, for purposes of calculating FRN auction settlement amounts and quarterly FRN interest payments, a13-week bill auction that takes place in the two business day Lock-Out Period prior to the FRN auction settlement date or FRN Interest Date shall be excluded from the calculation of accrued interest for purposes of that settlement amount or interest payment. C. INDEX RATE The High Rate from a 13-week Treasury bill auction asannounced by the Bureau of the Public Debt, converted to a simple-interest money market yield on an actual/360 basis. D. SPREAD As determined in the security’s initial auction; expressed intenths of a basis point. 47 E. MINIMUM DAILY INTEREST ACCRUAL 0.000 percent F. RESET FREQUENCY Daily, if not a Business Day then the preceding Business Day. G. DAY COUNTCONVENTION actual/360 H. LOCK-OUT PERIOD The two business days preceding an FRN auction Issue date or an FRN Interest Date. VIII. BUSINESS DAY Any day other than a Saturday, a Sunday, or a day on which the Federal Reserve Bank of New York is closed. IX. STRIPS ELIGIBLE No X. CALCULATION AGENT United States Treasury XI. ORIGINAL ISSUE PRICE Determined at auction XII. AUCTION TECHNIQUE A single price auction format in which each competitive tender specifies a Discount Margin (which can be positive, zero, or negative, expressed in tenths of a basis point). Treasury will first accept in full all noncompetitive tenders up to $5 million per submitter received by the closing time specified in the offering announcement. Competitive tenders will be accepted in order of Discount Margin, starting from the lowest Discount Margin, up to the Discount Margin needed to fill the public offering. The usual Treasury proration rules will apply if the amount of tenders indicating the highest accepted Discount Margin exceeds the amount of the public offering remaining. The Spread on a floating rate note offered in an originalissue auction will be set at the highest accepted Discount Margin in that auction. The Spread on a floating rate note offered in a reopeningauction will be as set in the note’s original issue auction. 48
Posted on: Wed, 12 Mar 2014 02:34:44 +0000
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