A Treasury floating rate note, or FRN, is a 2-year note whose interest rate is not fixed. Every week it resets to follow the latest 13-week Treasury bill auction, plus a small spread locked in when the FRN was first sold, and the interest is paid every three months. In practice it behaves much like rolling 13-week bills for two years without doing the rollovers yourself. This guide shows how the rate is calculated, how the spread is set, what a real $10,000 FRN paid last quarter and how FRNs compare with bills and money market funds. For the rest of the Treasury family, see the US Treasuries hub.
What is a Treasury floating rate note?
A Treasury FRN is a 2-year US government note that pays a variable rate, reset weekly from 13-week bill auctions, with interest paid every three months.
FRNs follow the same basic rules as other marketable Treasuries. They sell in $100 steps from a $100 minimum, at TreasuryDirect or through a bank or broker, a noncompetitive bid can buy up to $10 million per auction, and they are backed by the full faith and credit of the United States. A new 2-year FRN is auctioned in January, April, July and October, and each one is reopened in the two months that follow. Unlike fixed-rate notes and bonds, FRNs cannot be split into STRIPS.
They are also the newest kind of Treasury. Treasury held its first FRN auction in January 2014, offering $15 billion of 2-year notes, the first new type of marketable security since TIPS arrived in 1997. Demand is deep now: the October 2026 FRN drew bids for $91.6 billion against $30 billion on offer. The next sales on Treasury's tentative schedule are reopenings on November 24 and December 23, 2026 and a new FRN on January 27, 2027.
If you want to compare FRNs with the fixed-rate alternatives, Treasury notes explained covers 2- to 10-year notes and what is a Treasury bill covers the bills whose auctions drive the FRN rate.
How is the FRN interest rate calculated?
The daily rate is an index from the latest 13-week bill auction plus the FRN's fixed spread, with interest accruing every day on a 360-day year.
The index starts from the high discount rate at each 13-week bill auction. Treasury converts that discount rate into a simple-interest money market yield on an actual/360 basis, rounded to nine decimal places, using the number of days the bill runs:
Worked example: From the October 26, 2026 bill auction to an FRN's daily interest
- The 13-week bill auctioned on October 26, 2026 runs 91 days and had a high discount rate of 4.050%
- Index rate: 360 × 4.050% ÷ (360 − 4.050% × 91) = 4.091890731%
- Spread on the October 2026 FRN (CUSIP 91282CRS2): 0.038%
- Accrual rate: 4.091890731% + 0.038% = 4.129890731% a year
- Daily interest on $10,000: $10,000 × 4.129890731% ÷ 360 = about $1.15
- That rate applies from the day after the bill auction until the next 13-week auction changes the index
The 360-day convention hides a useful equivalence. A 13-week bill's investment rate is quoted on a 365-day basis, and the same October 26 auction produced an investment rate of 4.149%. Multiply the FRN index by 365 ÷ 360 and you get the same figure, apart from rounding: 4.091890731% × 365 ÷ 360 = 4.149%. So an FRN with a zero spread earns about what rolling 13-week bills would, and the spread is the extra on top. The Treasury bill calculator turns any bill discount rate into an investment rate if you want to check the bill side yourself.
How is the spread set at auction?
The spread is the highest accepted discount margin at the FRN's first auction, and it stays fixed for the note's full two years, including reopenings.
Bidders at an FRN auction name a discount margin, the amount over the index they want to earn. Treasury accepts bids from the lowest margin upward until the offering is sold, and the highest accepted margin, called the high discount margin, becomes the spread for every buyer. At a reopening the spread is already fixed, so the auction's high discount margin sets the price instead. Here is what the last eight new FRNs locked in:
| FRN first auctioned | Matures | Spread |
|---|---|---|
| January 2025 | January 31, 2027 | 0.098% |
| April 2025 | April 30, 2027 | 0.160% |
| July 2025 | July 31, 2027 | 0.159% |
| October 2025 | October 31, 2027 | 0.190% |
| January 2026 | January 31, 2028 | 0.099% |
| April 2026 | April 30, 2028 | 0.103% |
| July 2026 | July 31, 2028 | 0.050% |
| October 2026 | October 31, 2028 | 0.038% |
Spreads are small next to the index, but they add up. The difference between the October 2025 FRN's 0.190% and the October 2026 FRN's 0.038% is 0.152 point, about $15 a year on $10,000. Because every FRN shares the same index, the spread is the only lasting difference between one FRN and another, apart from maturity.
When does the rate reset, and when is interest paid?
The rate resets the day after each weekly 13-week bill auction, interest accrues daily, and the total is paid every three months.
- Weekly resets. The 13-week bill is normally auctioned on Mondays, so a new rate usually starts on Tuesday. Holidays shift the timing: after Labor Day in 2026 the bill auction moved to Tuesday, September 8, and the new rate began on Wednesday, September 9.
- Quarterly payments. Interest is paid on the last day of January, April, July and October. The October 2026 FRN's first payment is due January 31, 2027, a Sunday, so it arrives on Monday, February 1, and its last payment comes with the principal on October 31, 2028.
- Lockout before payments. A 13-week bill auction held in the two business days before an interest payment or settlement date is left out of that payment's calculation, and the rate change it would have caused waits until that two-day window ends, so the amount due is known in advance.
- A floor at zero. The daily accrual rate cannot fall below zero, even if a negative spread and a very low index pointed that way.
- Fallbacks. If a weekly 13-week auction is skipped, the rate in effect stays until the next results are announced. If Treasury stopped selling 13-week bills altogether, it could name a new index even for outstanding FRNs, and it can choose a different index for newly issued ones.
- Accrued interest at purchase. Buyers pay any interest accrued since the last payment date. The October 2026 FRN was dated October 31 but issued on November 2, so buyers paid 0.022943838 per $100, or $2.29 on $10,000.
How much does a $10,000 FRN pay in a quarter?
$10,000 of the July 2026 FRN earned $102.01 for July 31 to October 31, 2026, adding up 92 daily accruals at 14 different weekly rates.
That FRN (CUSIP 91282CRD5) has a 0.050% spread. Each row below is one week's 13-week bill auction, the index it produced, and the days that rate applied:
| 13-week bill auction | High discount rate | Index rate | Accrual rate | Days applied | Interest on $10,000 |
|---|---|---|---|---|---|
| July 27 | 3.815% | 3.852148% | 3.902148% | 4 (Jul 31 to Aug 3) | $4.34 |
| August 3 | 3.750% | 3.785887% | 3.835887% | 7 (Aug 4 to 10) | $7.46 |
| August 10 | 3.735% | 3.770599% | 3.820599% | 7 (Aug 11 to 17) | $7.43 |
| August 17 | 3.715% | 3.750217% | 3.800217% | 7 (Aug 18 to 24) | $7.39 |
| August 24 | 3.715% | 3.750608% | 3.800608% | 7 (Aug 25 to 31) | $7.39 |
| August 31 | 3.770% | 3.806273% | 3.856273% | 8 (Sep 1 to 8) | $8.57 |
| September 8 | 3.800% | 3.836855% | 3.886855% | 6 (Sep 9 to 14) | $6.48 |
| September 14 | 3.970% | 4.010244% | 4.060244% | 7 (Sep 15 to 21) | $7.89 |
| September 21 | 4.015% | 4.056166% | 4.106166% | 7 (Sep 22 to 28) | $7.98 |
| September 28 | 4.110% | 4.153148% | 4.203148% | 7 (Sep 29 to Oct 5) | $8.17 |
| October 5 | 4.050% | 4.091891% | 4.141891% | 8 (Oct 6 to 13) | $9.20 |
| October 13 | 4.085% | 4.127622% | 4.177622% | 6 (Oct 14 to 19) | $6.96 |
| October 19 | 4.095% | 4.137832% | 4.187832% | 7 (Oct 20 to 26) | $8.14 |
| October 26 | 4.050% | 4.091891% | 4.141891% | 4 (Oct 27 to 30) | $4.60 |
| Total | 92 | $102.01 |
Worked example: Reading the quarter
- Index rates are shown to six decimals; Treasury computes them to nine, and the total uses the full figures
- The rounded rows add to $102.00, while the unrounded total is $102.01
- The two 3.715% weeks give slightly different index rates because the August 24 bill ran 92 days instead of 91
- Average accrual rate: $102.01 ÷ $10,000 × 360 ÷ 92 = about 3.99% a year
- October 31, 2026 was a Saturday, so the payment arrived on Monday, November 2
The quarter shows the FRN doing its job: the 13-week bill's auction rate climbed about 0.4 point between mid-August and late September, and the accrual rate climbed with it within days. If the index simply stayed at its October 26 level, the October 2026 FRN would pay about $105.54 on $10,000 for its first 92-day quarter. That is an illustration, not a forecast; every 0.25-point change in the bill rate moves a quarter's interest by about $6.39.
How do FRNs compare with T-bills and money market funds?
All three track short-term rates, but an FRN resets weekly for two years, a bill locks its rate until maturity, and a money market fund's yield floats daily.
| 2-year FRN | 13-week bills, rolled | Government money market fund | |
|---|---|---|---|
| Rate changes | Weekly, the day after each 13-week bill auction | At each rollover, every 13 weeks | Daily, as the fund's holdings turn over |
| Extra over the 13-week rate | The fixed spread, 0.038% for the October 2026 FRN | None | None; the yield is net of fund expenses |
| How income arrives | Interest every three months | The discount, at each maturity | Dividends |
| Price movement | Small, driven by the discount margin buyers want | Small, since each bill matures within weeks | Most aim for a stable $1.00 share price |
| Effort | None for two years | A rollover every 13 weeks, automatic if scheduled | None |
| Getting cash out | Sell through a broker at the market price | Wait for maturity or sell through a broker | Redeem on any business day |
| Backing | Full faith and credit of the United States | Full faith and credit of the United States | A fund holding at least 99.5% in cash, government securities and fully collateralized repos; not FDIC-insured |
| State and local income tax | Exempt | Exempt | Depends on the fund's holdings and your state |
The trade-off is mostly about effort and flexibility. An FRN follows bill rates for two years with no rollovers and a small spread on top, but getting out early means a broker sale, and FRNs held at TreasuryDirect must first sit for 45 calendar days and be transferred out. A money market fund is easier to dip into but keeps an expense ratio. Rolled bills sit in between, and a fixed 2-year note gives up the floating rate in exchange for locking today's yield. T-bills vs money market funds and how money market funds work cover the fund side.
All three respond to the Federal Reserve. After its October 28, 2026 meeting, the federal funds target range stood at 3.75% to 4.00%, and bill auction rates move with expectations for that range. How Fed rate decisions affect T-bill rates shows how quickly past decisions reached bill yields, and so FRN income.
What moves the price of an FRN?
An FRN's price moves mainly when the discount margin buyers demand differs from its fixed spread, so swings are measured in cents per $100, not dollars.
Because the rate resets every week, a change in interest rates barely touches an FRN's value. What does move it is demand for the spread. The July 2026 FRN's reopenings show the scale: on August 26, buyers wanted a 0.055% margin against its 0.050% spread, so it sold at 99.988631 per $100, about $1.14 below par on $10,000. On September 23 they accepted 0.040%, and it sold above par at 100.015499, about $1.55 over.
A rough rule: the price changes by about the gap between the spread and the market's discount margin, times the years left. A 0.10-point rise in the margin buyers demand would cost roughly $20 on $10,000 of a new FRN. Compare that with a fixed-rate 2-year note, which would lose about $187 on $10,000 if yields rose 1 point. That stability is the main reason FRNs appeal for money that might be needed before two years are up, though any sale before maturity still happens at the market price through a broker.
What are the risks of Treasury FRNs?
FRNs carry almost no credit or price risk, but their income falls when bill rates fall, and the spread, liquidity and taxes all matter.
- Falling income. The same weekly reset that helps when rates rise works against you when they fall. Each 0.25-point drop in the bill rate trims about $6.39 a quarter from $10,000. By contrast, the 2-year fixed note sold on October 26, 2026 locked in 4.708% for its whole term.
- Inflation risk. FRN rates follow bill rates, not prices. With consumer prices up 3.7% in the year to September 2026, most of an FRN's roughly 4.1% rate was offset by inflation before tax.
- Spread risk. If newer FRNs come with wider spreads, an older one with a thin spread sells slightly below par, and its income stays behind theirs for the rest of its life.
- Liquidity. FRNs are a smaller market than bills, so the bid-ask spread can be wider, especially for small amounts and older issues, and TreasuryDirect cannot sell them for you.
- Timing quirks. Rates change with a lag of up to a week, and rate changes pause in the lockout days before each payment.
- Taxes. Interest is taxable federally every year, though exempt from state and local income tax.
The full faith and credit of the United States stands behind each payment. Are Treasuries risk-free? discusses the limits of that protection, and types of investment risk defines income, inflation and liquidity risk in more detail.