Treasury Exploring New Types of Debt Securities

February 01, 2012 at 09:10 AM

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WASHINGTON (AP) — The Treasury Department is exploring the idea of issuing two new types of securities as a way of expanding the government's means of financing operations.

One of the securities would offer a floating interest rate rather than a fixed rate. The other would allow for securities to be auctioned with negative yields, which essentially allows investors to pay the government for the privilege of buying those securities.

Mortgage giants Fannie Mae and Freddie Mac have had success selling floating-rate securities.

Treasury officials said Wednesday that their bond advisory committee has recommended both instruments. They expect to make a decision in May.

Treasury also announced that it would auction $72 billion in Treasury securities next week in its regular quarterly refunding. Those securities will include $32 billion in 3-year notes, $24 billion in 10-year notes and $16 billion in 30-year bonds.

Those auctions will be part of the government's effort to borrow $444 billion in the current January-March quarter, the fifth highest quarterly borrowing operation in history. Borrowing needs have surged as the government has had to fund record budget deficits.

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