Felix Salmon on the Treasury Department's plan on the Floating Rate Notes: Why Would Treasury Want To Issue Floaters? (Link here) One point he makes in the article about the potential reference rate:
Continuing in the mode of offering self-serving advice that would be bad for Treasury, the TBAC recommended that Treasury use the new GCF index as the reference rate for FRNs. This would put Treasury in a position of taking on private credit risk, since, if we had a 2008-style meltdown and general collateral (rates) widened out due to counterparty risk, Treasury's FRN borrowing costs would soar.
The data on the GCF index can be downloaded (here), but I find it interesting that the DTCC (Depository Trust & Clearing Corporation) only publish the data for the past year, even though the data does go back a little further than that and the amount of data is sufficiently small that it is hardly a computing resource drain.
Plotting what is available, here is the Repo Index with the corresponding Par value used to average out the index:
In addition to the potential counter-party risk that Felix mentioned, the figure below shows how the repo index is more volatile than the constant maturity rate that the Treasury Department calculates every day (Felix also make this point in his article). The constant maturity yield is also a potential for use as a reference rate, though the concern here is that there’s a potential conflict of interest if the Treasury use a reference rate that itself calculates. One way to alleviate that is to make the methodology of calculation the constant maturity public info. The calculation is currently not clearly specified by the Department.)
I wonder given the relative volatility, would the use of the repo index deter some market participant from buying the instrument.
Reference: DTCC GCF Repo Index [DTCC],
Daily Treasury Yield Curve Rates [Treasury Department],
Why Would Treasury Want To Issue Floaters? [Seeking Alpha]