Gyroscopic Investing

this article refers to a proposal for TREASURY FLOATING RATE NOTEs to be issued.

http://www.zerohedge.com/news/2013-05-0 ... term-sheet

If this is implemented, how might it impact our LTT? Is this something we need to keep an eye on? Is this something totally new for the US?

Doesn't seem appropriate for the PP, which relies on capturing the volatility of the capital value of the bonds. With a floating interest rate, the capital value shouldn't fluctuate as much (if even very much at all), so we wouldn't be able to harvest the gains as easily. It's the same reason why we don't use low-volatility stock index funds for stocks, despite their measurable outperformance on their own over all observable timeframes. It's all about how it fits into the larger portfolio.

Could be a good VP play for those worried about rising interest rates though.

In some ways these floaters are kind like the barbell. They are kind of like a portfolio of rolled over T-Bills and a zero coupon bond combined into one product. I think you could have replicated the same return profile without the Treasury even releasing this issue.

I must be missing something here...how is this different from 13-week T-bills with auto rollover?  From the point of view of a retail investor, at least.

I'll stick with the autoroll.  Works quite nicely at either Fidelity or Treasury Direct.

sophie wrote: I must be missing something here...how is this different from 13-week T-bills with auto rollover?  From the point of view of a retail investor, at least.

I'll stick with the autoroll.  Works quite nicely at either Fidelity or Treasury Direct.

Exactly. The only difference is that there is still a fixed principal repayment at the end that gives the bond some element of duration. The whole thing is really gimmicky.