Floating Rate Notes (FRNs) In Depth

The U.S. Treasury began issuing Floating Rate Notes (FRNs) in January 2014. The securities have a term of two years.

The price of an FRN may be greater than, less than, or equal to the face value of the security.

When an FRN matures, you are paid its face value.

FRNs are sold in TreasuryDirect and by banks and brokers. You can bid for an FRN in either of two ways:

  • With a noncompetitive bid, you agree to accept the high discount margin determined at auction. With this bid, you are guaranteed to receive the FRN you want, and in the full amount you want.
  • With a competitive bid, you specify the discount margin you are willing to accept. Your bid will be: 1) accepted in the full amount you want if your bid is less than the high discount margin determined at auction, 2) accepted in less than the full amount you want if your bid is equal to the high discount margin, or 3) rejected if your bid is above the high discount margin.

To place a noncompetitive bid, you may use TreasuryDirect, a bank, or a broker.

To place a competitive bid, you must use a bank or broker.

Results of recent FRN auctions

Key Facts

  • Interest payments on FRNs rise and fall, based on discount rates for 13-week bills.
  • FRNs are sold in increments of $100. The minimum purchase is $100.
  • FRNs are issued in electronic form.
  • You can hold an FRN until it matures or sell it before it matures.
  • In a single auction, a bidder can buy up to $10 million in FRNs by non-competitive bidding or up to 35% of the initial offering amount by competitive bidding.