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May 1, 2013

US Treasury picks T-Bills index for FRN issuance

In its quarterly refunding announcement, the US Treasury announced it has selected a T-Bill based index to provide floating rates for its new FRN issuance program (mooted to start issuing bonds in Q4 2013 or Q1 2014) – but with no elaboration of rationale. The other possibility they were looking at was DTCC's Treasury Bond GCF repo rate (based on overnight triparty repo transactions settled via DTCC).  Had this been chosen it might have boosted demand for futures / OTC derivatives as hedges for the short term FRNs.  And in turn on the larger USD LIBOR replacement discussion where the same DTCC GCF repo rate is vying with OIS.


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