New York Fed: "Introduction to the Floating-Rate Note Treasury Security"

From the Federal Reserve Bank of New York's Liberty Street Economics blog:

Introduction
The U.S. Department of the Treasury (Treasury) auctioned its first floating-rate note (FRN) on January 29, 2014. With this auction, Treasury introduced the first new marketable debt instrument since Treasury inflation-protected securities (TIPS) in 1997. The new two-year FRN is a fixed-principal security with quarterly interest payments and interest rates indexed to the thirteen-week Treasury bill. In this post, we will discuss Treasury’s reasons for adopting an FRN as well as the existing FRN markets, expected FRN market participants, and results of the first FRN Treasury security auction.

Why Adopt an FRN?
Treasury generally seeks to minimize the long-run cost of issuing government debt. By adding a new product to the existing offering of marketable debt securities, Treasury expects that the investor base will expand, which will serve to lower Treasury’s borrowing cost. Recently, Treasury has also been extending the maturity of its debt portfolio as part of its strategy to control the overall cost of financing in a way that remains resilient during periods of market volatility and to lower the risk of a failed auction. ...MUCH MORE