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RESEARCH CENTER

Floating Rate Notes (FRNs): How To Buy

The U.S. Treasury began issuing Floating Rate Notes (FRNs) in January 2014. You can buy the securities two ways: one, through TreasuryDirect, directly from us; or, two, through a bank or broker.

FRNs may sell at par, discount, or premium, and the price may include accrued interest. For more information, see Floating Rate Notes: Rates and Terms.

Buying Directly From the U.S. Treasury

To buy FRNs directly from us, you must have an account in TreasuryDirect. "Open An Account."

By bidding for a FRN in TreasuryDirect, you:

  • Agree to accept whatever high discount margin is determined at auction
  • Are guaranteed to receive the FRN you want, in the amount you want

(This is called noncompetitive bidding.)

Submit a Bid in TreasuryDirect

To bid in TreasuryDirect, login to your account and click the BuyDirect® tab. Follow the prompts to specify the security you want, the purchase amount, and other requested information.

Payments and Receipts in TreasuryDirect

When you buy an FRN in TreasuryDirect, we withdraw the purchase price from the source of funds you specify, which could be your bank account or your Certificate of Indebtedness (C of I). When the FRN matures, we deposit payments into your bank account or your C of I, whichever you specify.

Buying Through a Bank, Broker, or Dealer

With a bank or broker, you can bid noncompetitively or competitively. With a competitive bid for an FRN, you specify the discount margin you will accept. If you bid this way, you may or may not receive the FRN you want, and, if you receive it, you may receive it in less than the amount you want. Your bid will be fully awarded if the discount margin you bid is less than the high discount margin set by the auction, partially awarded if the discount margin you bid is equal to the high discount margin, or not awarded if the discount margin you bid is above the high discount margin.

Banks and brokers offer two types of bidding for FRNs:

  • Competitive

You specify the discount margin you will accept.

Depending on what high discount margin is determined at the auction, you may or may not receive the FRN you want, and if you receive it, you may receive it in less than the amount you want.

Your bid will be fully awarded if the discount margin you bid is less than the high discount margin set by the auction, partially awarded if the discount margin you bid is equal to the high discount margin, or not awarded if the discount margin you bid is above the high discount margin.

  • Noncompetitive

You agree to accept whatever high discount margin is determined at auction.

You are guaranteed to receive the FRN you want, in the amount you want.

For more information, consult a bank or broker.