A new U.S. Treasury note will be available on January 29. But don't look for high yields.
(Money Magazine)
The U.S. has a deal for you -- though it's probably not a good one.
On Jan. 29, the Treasury will start selling its first new security in 17 years, the floating-rate note.
Unlike the case with most U.S. debt, which pays fixed rates, interest on the two-year FRNs will adjust weekly, tied to changes in the rate the Treasury pays on debt maturing in three months.
Related: Stocks, bonds? In 2014, think cash
While the FRNs' initial yield is expected to be low -- around 0.16%, compared with 0.3% in December for two-year Treasuries -- demand could be high, partly because investors don't want to be stuck with two-year notes if short-term rates rise.
But those rates aren't likely to budge soon, says Collin Martin, an analyst at the Schwab Center for Financial Research. Skip the notes, to be sold via TreasuryDirect.gov; instead, get better yields from online banks.
Floating rates, low yields
Interest on the U.S. Treasury's new debt securities has the potential to rise. Even so, the yield will likely be minuscule for the near future.
| Yield | 0.16% estimated | 0.3% | 0.9% |
NOTE: Estimate and actual yields as of Dec. 9, 2013. SOURCES: U.S. Treasury; Jerome Schneider, Pimco; Bankrate.com
First Published: January 10, 2014: 4:18 PM ET
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