Development and Potential Issuance of Treasury Floating Rate Notes Indexed to the Secured Overnight Financing Rate, 31282-31284 [2020-11160]

Download as PDF 31282 Federal Register / Vol. 85, No. 100 / Friday, May 22, 2020 / Notices Form(s): N/A. Respondent Universe: 34 railroads. Frequency of Submission: On occasion. Total Estimated Annual Responses: 8,310. Total Estimated Annual Burden: 859 hours. Total Estimated Annual Burden Hour Dollar Cost Equivalent: $65,269. Under 44 U.S.C. 3507(a) and 5 CFR 1320.5(b) and 1320.8(b)(3)(vi), FRA informs all interested parties that it may not conduct or sponsor, and a respondent is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Authority: 44 U.S.C. 3501–3520. Brett A. Jortland, Deputy Chief Counsel. [FR Doc. 2020–11021 Filed 5–21–20; 8:45 am] BILLING CODE 4910–06–P DEPARTMENT OF THE TREASURY Bureau of the Fiscal Service Proposed Collection of Information: Direct Deposit Sign-Up Form Notice and request for comments. ACTION: The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. Currently the Bureau of the Fiscal Service within the Department of the Treasury is soliciting comments concerning the Direct Deposit Sign-Up Form. SUMMARY: Written comments should be received on or before July 21, 2020 to be assured of consideration. ADDRESSES: Direct all written comments and requests for additional information to Bureau of the Fiscal Service, Bruce A. Sharp, Room #4006–A, P.O. Box 1328, Parkersburg, WV 26106–1328, or bruce.sharp@fiscal.treasury.gov. SUPPLEMENTARY INFORMATION: Title: Direct Deposit Sign-Up Form. OMB Number: 1530–0050. Form Number: FS Form 5396. Abstract: The information is collected to process requests for direct deposit of a Series HH or Series H bond interest payment or a savings bond redemption payment to a financial institution. DATES: VerDate Sep<11>2014 18:07 May 21, 2020 Jkt 250001 Current Actions: Revision of a currently approved collection. Type of Review: Regular. Affected Public: Individuals or Households. Estimated Number of Respondents: 24,000. Estimated Time per Respondent: 10 minutes. Estimated Total Annual Burden Hours: 4000. Request for Comments: Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on: 1. Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; 2. the accuracy of the agency’s estimate of the burden of the collection of information; 3. ways to enhance the quality, utility, and clarity of the information to be collected; 4. ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and 5. estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. Dated: May 18, 2020. Bruce A. Sharp, Bureau PRA Clearance Officer. [FR Doc. 2020–11020 Filed 5–21–20; 8:45 am] BILLING CODE 4810–AS–P will serve as valuable input into this decision. DATES: Comments are due by July 6, 2020. You may submit comments using any of the following methods: Federal eRulemaking Portal: www.regulations.gov. Follow the instructions on the website for submitting comments. Email: govsecreg@fiscal.treasury.gov. Include docket number TREAS–DO– 2020–0007 in the subject line of the message. All submissions should refer to docket number TREAS–DO–2020–0007. Please submit your comments using only one method, along with your full name and mailing address. We will post all comments on www.regulations.gov and www.treasurydirect.gov. In general, comments received, including attachments and other supporting materials, are part of the public record and are available to the public. Do not submit any information in your comments or supporting materials that you consider confidential or inappropriate for public disclosure. FOR FURTHER INFORMATION CONTACT: Fred Pietrangeli, Director, Office of Debt Management, Office of the Assistant Secretary for Financial Markets, at debtmanagement@treasury.gov or Fredrick.Pietrangeli@treasury.gov. Questions about submitting comments should be directed to Lori Santamorena, Government Securities Regulations Staff, at (202) 504–3632 or govsecreg@ fiscal.treasury.gov. ADDRESSES: SUPPLEMENTARY INFORMATION: DEPARTMENT OF THE TREASURY I. Background [Docket No. TREAS–DO–2020–0007] Treasury continually seeks to finance the government at the lowest cost over time, manage its liability profile, foster healthy secondary markets, and expand the investor base for Treasury securities. Treasury is examining potential new products in pursuit of these goals. Following substantial analysis and consideration of input from market participants, in 2014 Treasury began issuing FRNs indexed to the 13-week Treasury bill rate (13-week T-bill FRNs). Since their launch, Treasury has issued more than $1.1 trillion of 13-week T-bill FRNs. A Treasury analysis released in 2017 showed that issuing 13-week T-bill FRNs had reduced realized interest costs by $1.3 billion (when compared to 2-year fixed-rate notes).1 Development and Potential Issuance of Treasury Floating Rate Notes Indexed to the Secured Overnight Financing Rate Department of the Treasury. Notice and request for information. AGENCY: ACTION: The Department of the Treasury (Treasury) is requesting comments on the possibility of issuing a floating rate note (FRN) indexed to the Secured Overnight Financing Rate (SOFR) published by the SOFR Administrator, currently the Federal Reserve Bank of New York (FRBNY). Treasury has not made a decision whether to issue FRNs indexed to SOFR (SOFR-indexed FRNs). Treasury will continue to weigh the merits of SOFRindexed FRNs, and comments received as part of this request for information SUMMARY: PO 00000 Frm 00148 Fmt 4703 Sfmt 4703 1 See 4th Quarter 2017 Treasury Borrowing Advisory Committee Discussion Charts, available at https://www.treasury.gov/resource-center/datachart-center/quarterly-refunding/Documents/ Q42017CombinedChargesforArchives.pdf. E:\FR\FM\22MYN1.SGM 22MYN1 Federal Register / Vol. 85, No. 100 / Friday, May 22, 2020 / Notices In light of the success of the 13-week T-bill FRN program and recent market developments, Treasury is exploring the possibility of issuing SOFR-indexed FRNs.2 Treasury has discussed the potential issuance of SOFR-indexed FRNs with the Treasury Borrowing Advisory Committee (TBAC),3 the primary dealers,4 and other Treasury market participants. These discussions have provided helpful feedback,5 and Treasury now seeks additional views from the public on the questions below. Treasury’s primary motivation for exploring SOFR-indexed FRNs is the consideration of new debt products that can be issued at the lowest cost of financing for the U.S. government. Treasury is cognizant that its issuance decisions can have broader effects on other issuers and market practices. Regardless of any decision about issuing SOFR-indexed FRNs, Treasury, as an exofficio member of the Alternative Reference Rates Committee (ARRC), is committed to promoting the transition away from U.S. dollar London Interbank Offered Rate (LIBOR).6 II. Solicitation for Comments Treasury invites views on the following topics. Please include: (1) The data or reasons, including examples, supporting any opinions or conclusions; (2) alternative approaches and options that should be considered, if any; and (3) any specific comments regarding general terms and conditions for the sale and issuance of Treasury SOFR-indexed FRNs. 1. Market Demand 1.1 Which types of investors would be the primary buyers of Treasury 2 See October 30, 2019 Quarterly Refunding Policy Statement, available at https:// home.treasury.gov/news/press-releases/sm810 and February 5, 2020 Quarterly Refunding Policy Statement available at https://home.treasury.gov/ news/press-releases/sm896. 3 TBAC is a federal advisory committee that advises Treasury on debt management and other topics. See 2nd Quarter 2019 TBAC Discussion Charts, available at https://www.treasury.gov/ resource-center/data-chart-center/quarterlyrefunding/Documents/q22019CombinedChargesfor Archives.pdf and 3rd Quarter 2019 TBAC Discussion Charts, available at https:// www.treasury.gov/resource-center/data-chartcenter/quarterly-refunding/Documents/q32019 CombinedChargesforArchives.pdf. 4 The primary dealers serve as trading counterparties to FRBNY in its implementation of monetary policy. Primary dealers are also required to participate in all Treasury marketable securities auctions. 5 See May 6, 2020 Quarterly Refunding Policy Statement, available at https://home.treasury.gov/ news/press-releases/sm1001. 6 The ARRC is a group of private-market participants convened by the Board of Governors of the Federal Reserve System and FRBNY to help transition from U.S. dollar LIBOR to SOFR. See https://www.newyorkfed.org/arrc. VerDate Sep<11>2014 18:07 May 21, 2020 Jkt 250001 SOFR-indexed FRNs? Would Treasury SOFR-indexed FRNs attract new investor types or additional demand from existing Treasury investors? Assuming the possibility of a 1-year or 2-year maturity, how would the tenor of a Treasury SOFR-indexed FRN affect demand? 1.2 Please estimate annual demand for Treasury SOFR-indexed FRNs. Would demand be greater for a shorter tenor? How would potential growth in issuance of SOFR-indexed FRNs by other issuers affect long-term demand for Treasury SOFR-indexed FRNs? 2. Pricing and Liquidity 2.1 Would introducing a Treasury SOFR-indexed FRN help Treasury finance the government at the lowest cost over time? Why or why not? 2.2 How would you expect a Treasury SOFR-indexed security to price relative to a comparable maturity 13-week T-bill FRN security? How would this pricing vary across the economic cycle and interest rate environments? Please provide pricing estimates. 2.3 SOFR has risen significantly for certain short time periods, such as around some ends of months, quarters, and years. To what extent would such patterns, if they continue, affect the interest cost for Treasury on a SOFRindexed FRN, the interest payments of which would be based on a SOFR averaged or compounded rate over a longer interest accrual period? To what extent would investors be willing to bid lower discount margins at auctions for Treasury SOFR-indexed FRNs in expectation of such patterns continuing? Please elaborate. 2.4 During the global financial crisis, repurchase agreement rates were persistently higher than Treasury bill rates. More recently, during the COVID– 19 outbreak, liquidity in Treasury and other markets (including repurchase agreement markets) exhibited signs of stress. How would potential future periods of market stress affect SOFR? In a potential future period of market stress, how might interest costs for Treasury differ between a Treasury SOFR-indexed FRN and the 13-week Tbill FRN? Please elaborate. 2.5 How liquid would Treasury SOFR-indexed FRNs be in secondary markets? Please compare the expected liquidity of Treasury SOFR-indexed FRNs to Treasury bills, the existing 13week T-bill FRN, and off-the-run shortdated coupons. 3. Security Structure 3.1 What are the primary considerations Treasury should evaluate PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 31283 when structuring a Treasury SOFRindexed FRN? How would different potential security structures affect investment decisions by market participants, including with respect to activity in derivatives markets? 3.2 Some previously gathered feedback has suggested a 1-year final maturity for original issuance of a Treasury SOFR-indexed FRN. Is this maturity or another maturity preferable for a Treasury SOFR-indexed FRN? Please elaborate. 3.3. Is a quarterly issuance frequency with two reopenings appropriate for a Treasury SOFRindexed FRN, similar to the existing 13week T-bill FRN? What factors should Treasury consider in making this decision? 3.4 When during the month should Treasury auction SOFR-indexed FRNs? When should auctions settle? 3.5 Should interest on Treasury SOFR-indexed FRNs be calculated based on a simple average or a compounded average of SOFR? Should Treasury consider indexing the security to an average rate based on SOFR, such as those recently published by FRBNY as administrator for SOFR? 7 If so, what would be the optimal averaging period for a SOFR-indexed FRN? 3.6 What coupon frequency should be used for a Treasury SOFR-indexed FRN? Note that the existing 13-week Tbill FRN pays coupons quarterly. Would a semi-annual, or other coupon frequency be preferred? When during the month should coupon and principal payments be made? 3.7 Should the index rate for a Treasury SOFR-indexed FRN reset daily, weekly, or at some other frequency? 3.8 Should a Treasury SOFRindexed FRN incorporate a lockout (i.e., last k rates for an interest period set at SOFR k days before the period ends), a lookback or ‘‘lag’’ (i.e., for every day in the interest period, use SOFR from k days earlier), or a payment delay (i.e., coupon and principal payments made k days after the end of the interest period) in its structure? 8 If so, what values would be appropriate for each attribute? 7 For more information on the SOFR averages, see FRBNY, Statement Introducing the SOFR Averages and Index (March 2, 2020), available at https:// www.newyorkfed.org/markets/opolicy/operating_ policy_200302. 8 See ARRC, A User’s Guide to SOFR (April 2019), pp. 10–11, available at https:// www.newyorkfed.org/medialibrary/Microsites/arrc/ files/2019/Users_Guide_to_SOFR.pdf), and ARRC, ARRC Floating Rate Notes Working Group Statement On Use Of The SOFR Index (May 2020), available at https://www.newyorkfed.org/ medialibrary/Microsites/arrc/files/2020/Statement_ on_SOFR_Index.pdf. E:\FR\FM\22MYN1.SGM 22MYN1 31284 Federal Register / Vol. 85, No. 100 / Friday, May 22, 2020 / Notices Please explain relevant considerations for these features. 3.9 In light of FRBNY’s data contingency procedures for the publication of SOFR,9 what contingency measures should Treasury consider incorporating into the terms of a SOFRindexed FRN if SOFR, or an average rate based on SOFR, is temporarily unavailable or revised? 4. Existing 13-Week T-Bill FRN 4.1 If Treasury decides to issue SOFR-indexed FRNs, what, if any, changes should Treasury make to the existing 13-week T-bill FRN issuance program? 4.2 Should Treasury issue FRNs indexed to both indices, or should Treasury consolidate FRN issuance on a single index? 4.3 If there is not sufficient demand for both Treasury FRNs to coexist, which index would generate the greater long-term demand and better meet Treasury’s issuance objectives? Please elaborate. 4.4 Should Treasury consider issuing 13-week T-bill FRNs with a 1year final maturity? How should the decision regarding issuance of Treasury SOFR-indexed FRNs affect this possibility? 5. Market Transition 5.1 What proportion of likely investors is currently operationally ready to purchase Treasury SOFRindexed FRNs? For those investors that are not ready, what are the main impediments? How much lead time and investment would be required for additional investors to become operationally ready to purchase Treasury SOFR-indexed FRNs? Would any of the security structure choices mentioned in Section 3 above affect the operational readiness of likely investors? 5.2 To what extent would Treasury’s issuance of SOFR-indexed FRNs 9 For additional information, see FRBNY, Additional information about the Treasury Repo Reference Rates, available at https:// www.newyorkfed.org/markets/treasury-reporeference-rates-information. VerDate Sep<11>2014 18:07 May 21, 2020 Jkt 250001 advance the overall market transition away from U.S. dollar LIBOR? How would different market segments (e.g., FRNs, derivatives, business loans, consumer products) be affected by Treasury’s decision to issue SOFRindexed FRNs? What effect would Treasury’s issuance of SOFR-indexed FRNs have on the overall market transition away from LIBOR beyond that caused by current issuance of SOFRindexed FRNs by other issuers? Please provide specific details of the cause and effect relationships you expect. Brian Smith, Deputy Assistant Secretary for Federal Finance. [FR Doc. 2020–11160 Filed 5–20–20; 4:15 pm] BILLING CODE 4810–AS–P DEPARTMENT OF VETERANS AFFAIRS [OMB Control No. 2900–0178] Agency Information Collection Activity Under OMB Review: Monthly Certification of On-the-Job and Apprenticeship Training Veterans Benefits Administration, Department of Veterans Affairs. ACTION: Notice. AGENCY: In compliance with the Paperwork Reduction Act (PRA) of 1995, this notice announces that the Veterans Benefits Administration, Department of Veterans Affairs, will submit the collection of information abstracted below to the Office of Management and Budget (OMB) for review and comment. The PRA submission describes the nature of the information collection and its expected cost and burden and it includes the actual data collection instrument. DATES: Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to www.reginfo.gov/public/do/ PRAMain. Find this particular SUMMARY: PO 00000 Frm 00150 Fmt 4703 Sfmt 9990 information collection by selecting ‘‘Currently under 30-day Review—Open for Public Comments’’ or by using the search function. Refer to ‘‘OMB Control No. 2900–0178. FOR FURTHER INFORMATION CONTACT: Danny S. Green at (202) 421–1354. SUPPLEMENTARY INFORMATION: Authority: 38 U.S.C. 3680(c). Title: Monthly Certification of OnThe-Job Training, VA Form 22–6553d and VA Form 22–6553d–1. OMB Control Number: 2900–0178. Type of Review: Revision of a currently approved collection. Abstract: Schools and training establishments complete the form to report whether the trainee’s number of hours worked and/or to report the trainee’s date of termination. VA Form 22–6553d–1 is an identical printed copy of VA Form 22–6553d. VA Form 22– 6553d–1 is used when the computergenerated version of VA Form 22–6553d is not available. VA uses the data collected to process a trainee’s educational benefit claim. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The Federal Register Notice with a 60-day comment period soliciting comments on this collection of information was published at 85 FR 39 on February 27, 2020, page 11454. Affected Public: Private Sector. Estimated Annual Burden: 5,693 hours. Estimated Average Burden per Respondent: 10 minutes. Frequency of Response: On occasion (9 responses per respondent annually). Estimated Number of Respondents: 3,795 (34,155 responses). By direction of the Secretary. Danny S. Green, VA PRA Clearance Officer, Office of Quality, Performance and Risk, Department of Veterans Affairs. [FR Doc. 2020–11085 Filed 5–21–20; 8:45 am] BILLING CODE 8320–01–P E:\FR\FM\22MYN1.SGM 22MYN1

Agencies

[Federal Register Volume 85, Number 100 (Friday, May 22, 2020)]
[Notices]
[Pages 31282-31284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11160]


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DEPARTMENT OF THE TREASURY

[Docket No. TREAS-DO-2020-0007]


Development and Potential Issuance of Treasury Floating Rate 
Notes Indexed to the Secured Overnight Financing Rate

AGENCY: Department of the Treasury.

ACTION: Notice and request for information.

-----------------------------------------------------------------------

SUMMARY: The Department of the Treasury (Treasury) is requesting 
comments on the possibility of issuing a floating rate note (FRN) 
indexed to the Secured Overnight Financing Rate (SOFR) published by the 
SOFR Administrator, currently the Federal Reserve Bank of New York 
(FRBNY). Treasury has not made a decision whether to issue FRNs indexed 
to SOFR (SOFR-indexed FRNs). Treasury will continue to weigh the merits 
of SOFR-indexed FRNs, and comments received as part of this request for 
information will serve as valuable input into this decision.

DATES:  Comments are due by July 6, 2020.

ADDRESSES: You may submit comments using any of the following methods:
    Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions on the website for submitting comments.
    Email: [email protected]. Include docket number TREAS-
DO-2020-0007 in the subject line of the message.
    All submissions should refer to docket number TREAS-DO-2020-0007. 
Please submit your comments using only one method, along with your full 
name and mailing address. We will post all comments on 
www.regulations.gov and www.treasurydirect.gov. In general, comments 
received, including attachments and other supporting materials, are 
part of the public record and are available to the public. Do not 
submit any information in your comments or supporting materials that 
you consider confidential or inappropriate for public disclosure.

FOR FURTHER INFORMATION CONTACT: Fred Pietrangeli, Director, Office of 
Debt Management, Office of the Assistant Secretary for Financial 
Markets, at [email protected] or 
[email protected]. Questions about submitting comments 
should be directed to Lori Santamorena, Government Securities 
Regulations Staff, at (202) 504-3632 or [email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    Treasury continually seeks to finance the government at the lowest 
cost over time, manage its liability profile, foster healthy secondary 
markets, and expand the investor base for Treasury securities. Treasury 
is examining potential new products in pursuit of these goals.
    Following substantial analysis and consideration of input from 
market participants, in 2014 Treasury began issuing FRNs indexed to the 
13-week Treasury bill rate (13-week T-bill FRNs). Since their launch, 
Treasury has issued more than $1.1 trillion of 13-week T-bill FRNs. A 
Treasury analysis released in 2017 showed that issuing 13-week T-bill 
FRNs had reduced realized interest costs by $1.3 billion (when compared 
to 2-year fixed-rate notes).\1\
---------------------------------------------------------------------------

    \1\ See 4th Quarter 2017 Treasury Borrowing Advisory Committee 
Discussion Charts, available at https://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Documents/Q42017CombinedChargesforArchives.pdf.

---------------------------------------------------------------------------

[[Page 31283]]

    In light of the success of the 13-week T-bill FRN program and 
recent market developments, Treasury is exploring the possibility of 
issuing SOFR-indexed FRNs.\2\ Treasury has discussed the potential 
issuance of SOFR-indexed FRNs with the Treasury Borrowing Advisory 
Committee (TBAC),\3\ the primary dealers,\4\ and other Treasury market 
participants. These discussions have provided helpful feedback,\5\ and 
Treasury now seeks additional views from the public on the questions 
below.
---------------------------------------------------------------------------

    \2\ See October 30, 2019 Quarterly Refunding Policy Statement, 
available at https://home.treasury.gov/news/press-releases/sm810 and 
February 5, 2020 Quarterly Refunding Policy Statement available at 
https://home.treasury.gov/news/press-releases/sm896.
    \3\ TBAC is a federal advisory committee that advises Treasury 
on debt management and other topics. See 2nd Quarter 2019 TBAC 
Discussion Charts, available at https://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Documents/q22019CombinedChargesforArchives.pdf and 3rd Quarter 2019 TBAC 
Discussion Charts, available at https://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Documents/q32019CombinedChargesforArchives.pdf.
    \4\ The primary dealers serve as trading counterparties to FRBNY 
in its implementation of monetary policy. Primary dealers are also 
required to participate in all Treasury marketable securities 
auctions.
    \5\ See May 6, 2020 Quarterly Refunding Policy Statement, 
available at https://home.treasury.gov/news/press-releases/sm1001.
---------------------------------------------------------------------------

    Treasury's primary motivation for exploring SOFR-indexed FRNs is 
the consideration of new debt products that can be issued at the lowest 
cost of financing for the U.S. government. Treasury is cognizant that 
its issuance decisions can have broader effects on other issuers and 
market practices. Regardless of any decision about issuing SOFR-indexed 
FRNs, Treasury, as an ex-officio member of the Alternative Reference 
Rates Committee (ARRC), is committed to promoting the transition away 
from U.S. dollar London Interbank Offered Rate (LIBOR).\6\
---------------------------------------------------------------------------

    \6\ The ARRC is a group of private-market participants convened 
by the Board of Governors of the Federal Reserve System and FRBNY to 
help transition from U.S. dollar LIBOR to SOFR. See https://www.newyorkfed.org/arrc.
---------------------------------------------------------------------------

II. Solicitation for Comments

    Treasury invites views on the following topics. Please include: (1) 
The data or reasons, including examples, supporting any opinions or 
conclusions; (2) alternative approaches and options that should be 
considered, if any; and (3) any specific comments regarding general 
terms and conditions for the sale and issuance of Treasury SOFR-indexed 
FRNs.

1. Market Demand

    1.1 Which types of investors would be the primary buyers of 
Treasury SOFR-indexed FRNs? Would Treasury SOFR-indexed FRNs attract 
new investor types or additional demand from existing Treasury 
investors? Assuming the possibility of a 1-year or 2-year maturity, how 
would the tenor of a Treasury SOFR-indexed FRN affect demand?
    1.2 Please estimate annual demand for Treasury SOFR-indexed FRNs. 
Would demand be greater for a shorter tenor? How would potential growth 
in issuance of SOFR-indexed FRNs by other issuers affect long-term 
demand for Treasury SOFR-indexed FRNs?

2. Pricing and Liquidity

    2.1 Would introducing a Treasury SOFR-indexed FRN help Treasury 
finance the government at the lowest cost over time? Why or why not?
    2.2 How would you expect a Treasury SOFR-indexed security to price 
relative to a comparable maturity 13-week T-bill FRN security? How 
would this pricing vary across the economic cycle and interest rate 
environments? Please provide pricing estimates.
    2.3 SOFR has risen significantly for certain short time periods, 
such as around some ends of months, quarters, and years. To what extent 
would such patterns, if they continue, affect the interest cost for 
Treasury on a SOFR-indexed FRN, the interest payments of which would be 
based on a SOFR averaged or compounded rate over a longer interest 
accrual period? To what extent would investors be willing to bid lower 
discount margins at auctions for Treasury SOFR-indexed FRNs in 
expectation of such patterns continuing? Please elaborate.
    2.4 During the global financial crisis, repurchase agreement rates 
were persistently higher than Treasury bill rates. More recently, 
during the COVID-19 outbreak, liquidity in Treasury and other markets 
(including repurchase agreement markets) exhibited signs of stress. How 
would potential future periods of market stress affect SOFR? In a 
potential future period of market stress, how might interest costs for 
Treasury differ between a Treasury SOFR-indexed FRN and the 13-week T-
bill FRN? Please elaborate.
    2.5 How liquid would Treasury SOFR-indexed FRNs be in secondary 
markets? Please compare the expected liquidity of Treasury SOFR-indexed 
FRNs to Treasury bills, the existing 13-week T-bill FRN, and off-the-
run short-dated coupons.

3. Security Structure

    3.1 What are the primary considerations Treasury should evaluate 
when structuring a Treasury SOFR-indexed FRN? How would different 
potential security structures affect investment decisions by market 
participants, including with respect to activity in derivatives 
markets?
    3.2 Some previously gathered feedback has suggested a 1-year final 
maturity for original issuance of a Treasury SOFR-indexed FRN. Is this 
maturity or another maturity preferable for a Treasury SOFR-indexed 
FRN? Please elaborate.
    3.3. Is a quarterly issuance frequency with two reopenings 
appropriate for a Treasury SOFR-indexed FRN, similar to the existing 
13-week T-bill FRN? What factors should Treasury consider in making 
this decision?
    3.4 When during the month should Treasury auction SOFR-indexed 
FRNs? When should auctions settle?
    3.5 Should interest on Treasury SOFR-indexed FRNs be calculated 
based on a simple average or a compounded average of SOFR? Should 
Treasury consider indexing the security to an average rate based on 
SOFR, such as those recently published by FRBNY as administrator for 
SOFR? \7\ If so, what would be the optimal averaging period for a SOFR-
indexed FRN?
---------------------------------------------------------------------------

    \7\ For more information on the SOFR averages, see FRBNY, 
Statement Introducing the SOFR Averages and Index (March 2, 2020), 
available at https://www.newyorkfed.org/markets/opolicy/operating_policy_200302.
---------------------------------------------------------------------------

    3.6 What coupon frequency should be used for a Treasury SOFR-
indexed FRN? Note that the existing 13-week T-bill FRN pays coupons 
quarterly. Would a semi-annual, or other coupon frequency be preferred? 
When during the month should coupon and principal payments be made?
    3.7 Should the index rate for a Treasury SOFR-indexed FRN reset 
daily, weekly, or at some other frequency?
    3.8 Should a Treasury SOFR-indexed FRN incorporate a lockout (i.e., 
last k rates for an interest period set at SOFR k days before the 
period ends), a lookback or ``lag'' (i.e., for every day in the 
interest period, use SOFR from k days earlier), or a payment delay 
(i.e., coupon and principal payments made k days after the end of the 
interest period) in its structure? \8\ If so, what values would be 
appropriate for each attribute?

[[Page 31284]]

Please explain relevant considerations for these features.
---------------------------------------------------------------------------

    \8\ See ARRC, A User's Guide to SOFR (April 2019), pp. 10-11, 
available at https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2019/Users_Guide_to_SOFR.pdf), and ARRC, ARRC Floating 
Rate Notes Working Group Statement On Use Of The SOFR Index (May 
2020), available at https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2020/Statement_on_SOFR_Index.pdf.
---------------------------------------------------------------------------

    3.9 In light of FRBNY's data contingency procedures for the 
publication of SOFR,\9\ what contingency measures should Treasury 
consider incorporating into the terms of a SOFR-indexed FRN if SOFR, or 
an average rate based on SOFR, is temporarily unavailable or revised?
---------------------------------------------------------------------------

    \9\ For additional information, see FRBNY, Additional 
information about the Treasury Repo Reference Rates, available at 
https://www.newyorkfed.org/markets/treasury-repo-reference-rates-information.
---------------------------------------------------------------------------

4. Existing 13-Week T-Bill FRN

    4.1 If Treasury decides to issue SOFR-indexed FRNs, what, if any, 
changes should Treasury make to the existing 13-week T-bill FRN 
issuance program?
    4.2 Should Treasury issue FRNs indexed to both indices, or should 
Treasury consolidate FRN issuance on a single index?
    4.3 If there is not sufficient demand for both Treasury FRNs to 
coexist, which index would generate the greater long-term demand and 
better meet Treasury's issuance objectives? Please elaborate.
    4.4 Should Treasury consider issuing 13-week T-bill FRNs with a 1-
year final maturity? How should the decision regarding issuance of 
Treasury SOFR-indexed FRNs affect this possibility?

5. Market Transition

    5.1 What proportion of likely investors is currently operationally 
ready to purchase Treasury SOFR-indexed FRNs? For those investors that 
are not ready, what are the main impediments? How much lead time and 
investment would be required for additional investors to become 
operationally ready to purchase Treasury SOFR-indexed FRNs? Would any 
of the security structure choices mentioned in Section 3 above affect 
the operational readiness of likely investors?
    5.2 To what extent would Treasury's issuance of SOFR-indexed FRNs 
advance the overall market transition away from U.S. dollar LIBOR? How 
would different market segments (e.g., FRNs, derivatives, business 
loans, consumer products) be affected by Treasury's decision to issue 
SOFR-indexed FRNs? What effect would Treasury's issuance of SOFR-
indexed FRNs have on the overall market transition away from LIBOR 
beyond that caused by current issuance of SOFR-indexed FRNs by other 
issuers? Please provide specific details of the cause and effect 
relationships you expect.

Brian Smith,
Deputy Assistant Secretary for Federal Finance.
[FR Doc. 2020-11160 Filed 5-20-20; 4:15 pm]
 BILLING CODE 4810-AS-P
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