NEW YORK, Jan 29 (Reuters) - The U.S. government, seeking a new vehicle to raise cash, sold its first-ever floating-rate debt on Wednesday to strong demand.
The amount of bids on this variable-rate Treasuries issue from investors and Wall Street dealers was more than five times than the $15 billion offered.
“The first (floating-rate note) auction looks to have been a success,” Jefferies & Co. money market strategist Thomas Simons wrote in a note on the auction results.
Investors who are worried about rising interest rates due to an improving global economy and decreasing accommodation from the Federal Reserve have been drawn to bonds whose interest rates reset higher if benchmark borrowing costs rise.
The Fed is widely expected to pare its bond-purchase stimulus later Wednesday by $10 billion to $65 billion in February after a $10 billion reduction in January.
The Treasury Department auctioned $15 billion of floating-rate notes that mature in January 2016 at a yield premium of 0.045 percent above an index on interest rates on three-month Treasury bills, which stood at 0.055 percent. ] These two-year floaters were yielding below two-year fixed-rate notes. On Tuesday, the Treasury sold $32 billon in two-year fixed-rate debt at a yield of 0.38 percent, the highest since August.