Post From KTFA By Memphis » January 25th, 2014, 4:09 am • [Post 100]
U.S. Treasury to offer 15 bln USD in first floating rate
English.news.cn 2014-01-24 05:23:25
WASHINGTON, Jan. 23 (Xinhua)-- U.S. Treasury Department said on Thursday that it will offer 15 billion U.S. dollars in its first auction of floating rate notes next week, marking introduction of first new Treasury security in 17 years.
Floating rate note (FRN) is a new type of marketable security with a floating interest rate that resets each day, based on the discount rate of the most recent 13-week Treasury bills. It pays varying amounts of interest quarterly until maturity.
FRN is the first new security the Treasury has offered since 1997. And the initial auction of two-year FRN will take place on Jan. 29.
Read More Link On Right
"Floating rate notes bring additional diversity to Treasury's current portfolio and help support our goal of saving taxpayer dollars by financing the government's borrowing needs at the lowest cost over time," Mary Miller, the Treasury's under secretary for domestic finance, said in a statement.
Over the past three years, the Treasury has worked with market participants to design the floating rate note program. It is aimed at helping to finance the federal government at a lower cost and at the same time expand investor base.
tmellraney wrote on January 24th, 2014, 9:14 am:
EAGLE1, HELP US WITH THIS!!! COULD THIS BE PART OF THE GCR?
I heard on BBC NEWS this morning .........that the ALL-TIME-RECORD PLUNGE of certain FOREIGN CURRENCIES (i.e. Argentina, Turkey, China etc., etc.) and their selling their GOLD for USD is to support their economies temporarily for the next few months until the decline of the US dollar.
NOW, we see this FRN (Floating Rate Note). Could this be it?
Memphis: Good evening. This article speaks of a new borrowing strategy [FRN's] that the Treasury announced in early November right on the heels of the debt ceiling shutdown.
It's emergence is thanks to a strange mixture of politics and economics and signals the START of the coming rise in interest rates. Beginning during the Clinton era the Treasury began rolling their debts into short term instruments.
This new practice largely allowed the White House to magically come out with a balanced budget by showing savings in yearly interest expenditures on our debt.
Fast forward to today and this short term exposure now is working AGAINST our current administration by giving the tea party the ability to leverage the debt ceiling as a tool for negotiating.
By moving back towards longer term borrowing (2yrs) the debt ceiling can be approached without the constraints of time working against them.
The yield on the new notes will float according to market conditions and we will begin to see longer term rates start to rise.
Trust me, the Tresury knows that long term this is a big nail in the coffin and thus it becomes evidence that our nation is servant to the lender. The Wall Street bankers had a nice closed door session in the Oval Office over this one....
As always the natural cycles of money cannot be manipulated forever. This move by the Treasury is the mechanism that will allow the market to again take over and (over time) force interests rates back up from their artificially low levels.
As I stated a month ago in our 2hr cc, watching this develop will be the greatest single marker to follow because our nations debt level will not tolerate a rising interest rate. Many ugly things will manifest on the back side as our nation's insolvency actually shows itself and confidence begins to erode.
Speaking of confidence! This brings me to the last of your question...
What we read in the news Friday about emerging market currencies was a movement of capital due to a lack of confidence. One of the tenants of capital flows (that is admittedly hard to wrap your mind around) is that capital normally flows not in RESPONSE TO an event but rather in ANTICIPATION OF an event. And further? Often that event never even happens!
The catalyst here?
The ANTICIPATION that the FED will again reduce it's printing of $.
The prevailing theory at present is that the emerging market economies are most at risk of loss in the short term and so these nations are witnessing a flight to safety from their economies into what is PERCEIVED as a safe haven.
I see nothing of interest regarding these nations possibly repricing their currency in the near term. Argentina is actually in need of this as their inflation rate (if left unchecked) would constitute hyper-inflation but given that their central bank has relaxed rules on purchase of USD internally who's to say what they will do.
In short, IMO...."nothing to see here" regarding the dinar. It's just normal capital flows and I hope that in a small way this post can help folks take a deep breath and go enjoy their weekend !