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US Treasury May Issue Debt With Floating Interest Rate
CNBC.com | October 24, 2011 | 01:40 PM EDT

The Treasury Department and its perennial effort to fund the government's steepening debt load may get another weapon in its arsenal.

Dealers and traders have been approached recently with plans to issue a floating-rate note that for investors would provide an opportunity to profit should rates go up and for the government a chance to restructure its debt even further.

The move comes as Washington recently closed out its fiscal year with a budget deficit of just a shade under $1.3 trillion and a national debt rapidly approaching $15 trillion.

With no end in sight to the debt-and-deficit picture, Treasury is looking at ways to keep borrowing costs down while also bringing investors to the table still willing to lend their money to the US despite all its fiscal challenges.

"The government is trying to find a lot of different avenues to generate revenues here," says Kim Rupert, managing director of global fixed income analysis for Action Economics in San Francisco. "Obviously we have just a plethora of Treasury auctions. Given the budget outlook, it doesn't look like we're going to make inroads on the deficit anytime soon."

With the European Union battling its own debt crisis, investors have continued to buy Treasurys as a safe haven.

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