RT Journal Article
SR Electronic
T1 The New Market for Treasury Floating Rate Notes
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 52
OP 64
DO 10.3905/jfi.2017.27.2.052
VO 27
IS 2
A1 Karan Bhanot
A1 Liang Guo
YR 2017
UL https://pm-research.com/content/27/2/52.abstract
AB Treasury Floating Rate Notes (FRNs) were introduced in 2014 as a way to diversify the U.S. Treasury funding base and lower its borrowing costs. Using daily data on all Floating Rate Notes issued from 1/2014 to 10/2016 we find that FRNs deliver a statistically significant excess return relative to the underlying index, as well as relative to other short-term interest rate benchmarks. However, yield spreads with respect to comparable maturity fixed rate Treasuries, quarterly data on auction outcomes, and block holding disclosures by financial institutions support the objectives set forth by the Treasury. Collectively our article provides a perspective on FRN contract features, the return and risk of these instruments, and insight into their clientele.TOPICS: Fixed income and structured finance, risk management