The U.S. Treasury Department will offer $15 billion in its first auction of floating-rate notes next week, trying to capitalize on robust investor demand for the safest short-term investments.
Floaters, the Treasury's first new security in 17 years, will be sold at a Jan. 29 auction, with non-competitive bids closing at 11 a.m. and competitive bids ending at 11:30 a.m. Interest payment dates will be April 30, July 31, Oct. 31 and Jan. 31, the department said today in a statement.
"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 undersecretary for domestic finance, said in a separate statement.
Additional sales of floaters will occur in April, July and October, with two reopenings in the subsequent months of each quarter, the Treasury said.
Treasury's offering is in the upper end of the previously released range of $10 billion to $15 billion.
"It's a vote of confidence in the market," Gennadiy Goldberg, said Gennadiy Goldberg, a U.S. strategist at TD Securities USA LLC in New York.
The new kind of debt offers investors a short-term security that's a hedge against a potential rise in interest rates. For the Treasury, the world's largest sovereign debt issuer, the goal is to provide additional debt that appeals to investors.
Buyers will probably include asset managers, corporate treasurers, municipalities and government-sponsored enterprises and central banks, according to Fidelity Investments senior Vice President Karthik Ramanathan, a former Treasury debt management director.
The securities are considered short term because they are benchmarked to a short-term index the high rate from a 13-week bill. The rate at which interest will accrue on the notes will be re-set daily.