U.S. considers issuing floating-rate debt

[xchrom]

http://www.washingtonpost.com/business/economy/us-considers-issuing-floating-rate-debt/2012/05/01/gIQAeuO7uT_story.html

The Treasury Department is expected to announce Wednesday whether it will begin issuing a new type of federal debt for the first time in 15 years — a reflection of the global interest in storing cash in the United States and of the government’s desire to avoid unexpected disruptions in its ability to borrow.

The Treasury is considering following the advice of Wall street traders by introducing a type of investment known as a floating-rate note. The note would allow the government to borrow money for a fixed period — say, two years — while paying a variable interest rate.

For global investors, the new note would help satisfy demand for an ultra-safe place to store money at a time when the availability of other safe investments has shrunk. The sovereign debt crisis in Europe and the poor record of other fixed-income securities during the financial crisis have encouraged investors to park their cash in U.S. government securities.

As a result, rates on government debt have stayed extremely low despite the country’s rocketing obligations and the political gridlock in Washington that led Standard & Poor’s analysts in August to downgrade the U.S. credit rating.


*** honest to god -- following the advice from wall street?!?

[el_bryanto]

1. Where else are they going to get advice on financial instruments?

I think this is problematic, though. Does this mean that the Govt. expects rates to stay flat in the near future, or are they offering them so that people can bet that the economy is going to come back?

Bryant

[xchrom]

2. i think by this time we can say -- they don't know.

and there in lies a good chunk of the problem -- they let their greed tell them that they knew and that we were in a 'brand new world' -- where all notions of good financial sense were suspended.

i don't want our 'leaders' getting their advice from people who have royally fucked it up.

[el_bryanto]

4. Well Wall Street is a big place - home to people like Georges Soros for example

And also home to those immoral jerks at Goldman Sachs.

Bryant

[dmallind]

3. Good idea for investors - bloody silly for the Fed

They can already SELL all they want at near-zero rates. Why risk having to pay higher interest? This is like morons who sign up for ARMs when fixed rate mtgs are the lowest in generations.

[socialist_n_TN]

5. BAD idea........

ARMs were the downfall of the mortgage business and now Wall St. Recommends them for government

[dkf]

6. Wow that would be pretty stupid considering rates are at record lows

The only benefit is it would increase demand because the risk of rising interest rates is now on the government's back.

This makes me wonder if they aren't concerned demand for treasuries won't be there when the Fed stops sucking up the majority of treasury bonds like they have been. Interest rates and demand are being distorted by the Feds purchase of 60% of Treasuries in 2011.