How a Treasury FRN's floating rate actually works

Key takeaways

• TreasuryDirect says 2-year FRNs pay interest every three months and have an interest rate made up of an index rate plus a spread.
• TreasuryDirect says the index rate is tied to the highest accepted discount rate of the most recent 13-week Treasury bill and is reset every week.
• TreasuryDirect's reopening schedule says reopened FRNs keep the same CUSIP number, maturity date, and interest rate or spread as the original security, even though they have a different issue date and usually a different price.

A floating-rate note has one moving part and one fixed part

TreasuryDirect says the interest rate of an FRN is the sum of two components: an index rate and a spread. It says the index rate is tied to the highest accepted discount rate of the most recent 13-week Treasury bill and is reset every week, while the spread is set at the auction when the FRN is first offered and remains the same for the life of the security.

That means `floating` does not mean Treasury re-prices the whole instrument from scratch every week. The benchmark component floats, but the spread component does not.

Reopenings inherit the original economics more than many investors realize

TreasuryDirect's reopening schedule says a reopened security has the same CUSIP number, maturity date, and interest rate or spread as the original security, but a different issue date and usually a different price. For FRNs, the table shows the original 2-year issue is followed by two monthly reopenings in the next two months.

So when you buy a reopened FRN, you are not buying a wholly new floating-rate design. You are buying into the existing original security series, which keeps the original spread and maturity framework even though auction price and issue date differ.

• The index rate floats with weekly 13-week bill auctions.
• The spread is fixed at the original FRN auction.
• Reopenings usually change price and issue date, not the security's core spread framework.

Why Hynexly readers should care

FRNs matter when rate commentary shifts from `where are yields now` to `what benchmark is this instrument actually tied to`. Treasury's own design shows that an FRN is not just a vague floating-coupon promise.

For Hynexly readers, the practical rule is simple: separate the weekly-reset index component from the fixed spread component. That is the key to understanding why FRN coupons move over time while the original spread economics stay anchored.

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