Treasury to offer floating-rate securities

Washington - The Treasury Department said Wednesday that it will offer investors Treasury securities with variable interest rates, similar to those on some home mortgages.

Officials said actual sale of the new type of securities is at a least a year away because of the time needed to modify government computer systems to handle the floating-rate securities.

Treasury said it will continue to study a second unconventional way to sell government debt that would offer negative yields. Investors would, in effect, pay the government for the privilege of socking their money in ultra-safe Treasurys. No decision has been made yet on whether to proceed with negative-yield securities.

Many global investors have been shifting money into Treasurys out of fear of riskier securities, especially those linked to Europe's debt crisis. Such demand has helped drive down Treasury yields and made it cheaper for the U.S. government to borrow.

Normally, the longer the maturity on a Treasury security, the higher the yield the government must pay. But the variable-rate Treasury would let the government pay an initially low rate even while borrowing for two years or more.

Offering a variable rate would carry some risk for the government: It would have to pay investors more if rates rose, as many economists predict they will in coming years. Yet the government might consider that risk worth the benefit of attracting more investors.

In February, a Treasury advisory committee urged the government to offer both variable- and negative-yield securities. Mortgage giants Fannie Mae and Freddie Mac have had success selling floating-rate securities. And some foreign governments, including Britain and Italy, have been big issuers of floating-rate debt.

The last time the U.S. government issued a new type of Treasury was in 1997. That's when it introduced Treasury inflation-protected securities, or TIPS. Their yields are linked to inflation: When inflation rises, so do yields on TIPS.