[Federal Register Volume 60, Number 56 (Thursday, March 23, 1995)]
[Rules and Regulations]
[Pages 15430-15433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7134]
[[Page 15429]]
_______________________________________________________________________
Part V
Department of the Treasury
_______________________________________________________________________
Fiscal Service
_______________________________________________________________________
31 CFR Part 351
Offering of United States Savings Bonds, Series EE; Final Rule
Federal Register / Vol. 60, No. 56 / Thursday, March 23, 1994 / Rules
and Regulations
[[Page 15430]]
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 351
[Department of the Treasury Circular, Public Debt Series No. 1-80]
Offering of United States Savings Bonds, Series EE
AGENCY: Bureau of the Public Debt, Fiscal Service, Department of the
Treasury.
ACTION: Final rule.
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SUMMARY: This Final Rule amends the offering circular for Series EE
United States Savings Bonds to reflect rate changes for Series EE
savings bonds issued on or after May 1, 1995, and the repeal of the
statutory minimum 4 percent investment yield guarantee. The purpose of
these changes is to provide for greater flexibility in determining and
calculating the interest rates and redemption values for Series EE
savings bonds.
EFFECTIVE DATE: May 1, 1995.
FOR FURTHER INFORMATION CONTACT: Wallace Earnest, Director, Division of
Staff Services, Savings Bond Operations, Bureau of the Public Debt,
Parkersburg, West Virginia 26106-1328 (304) 480-6319, or Edward
Gronseth, Deputy Chief Counsel, or Bob Riffle, Paralegal Specialist,
Office of the Chief Counsel, Bureau of the Public Debt (304) 480-5192.
SUPPLEMENTARY INFORMATION:
I. Background
On March 15, 1976, the savings bonds statute, the Second Liberty
Bond Act (31 U.S.C. 757c(b), later codified at 31 U.S.C. 3105), was
amended to require that the investment yield on Series E savings bonds
would not be less than 4 percent per annum, compounded semiannually,
from the first day of the month after issue date to the last day of the
month before the redemption date (31 U.S.C. 3105(b)(2)). The purpose of
this amendment was to provide savings bond owners with a guaranteed
minimum rate of return no matter when they redeemed their bonds. In
1982, the Treasury amended the offering circular for Series EE bonds
held at least 5 years. The returns were linked to yields for 5-year
Treasury securities. A guaranteed minimum rate was still in effect, but
it declined over the years from 7.5 percent to 6 percent to the
statutory 4 percent floor.
On December 8, 1994, the guaranteed minimum 4 percent was repealed
(Pub.l. 103-465). This statutory change provided the opportunity for
Treasury to consider a fresh approach to determining rates for new
savings bonds and better achieve the goals of the Savings Bond Program.
II. Summary of Amendments
Section 351.0 is amended to change the effective date of the
offering circular to May 1, 1995.
Paragraphs (e) through (i) of section 351.2, are amended to ensure
that the provisions of those paragraphs do not conflict with or
contradict other changes to Section 351.2, as described below.
A new paragraph (j) is added to Section 351.2 to describe changes
in the terms and conditions for Series EE bonds offered for sale on and
after May 1, 1995. The following paragraphs describe the terms and
conditions for such bonds:
Market Yields. Treasury uses market bid yields for bills, notes,
and bonds to create a yield curve based on the most actively traded
Treasury securities. This curve relates the yield on a security to its
time to maturity. Yields at particular points on the curve are referred
to as ``constant maturity yields'' and are determined by the U.S.
Treasury from this daily yield curve. The Board of Governors of the
Federal Reserve System currently publishes daily Treasury constant
maturity yields in the Statistical Release H.15, ``Selected Interest
Rates''. The 6-month and 5-year Treasury securities rates described
below are derived from these yield curves. (Note: This method of
determining market rates has been used since the inception of the
market-based program in 1982).
Short-Term Savings Bond Rate. No less frequently than on each May 1
and November 1, Treasury announces a short-term savings bond rate. To
determine this rate, Treasury compiles 6-month Treasury securities
rates as of the close of business for each day of the previous three
months and calculates the monthly average for each month, rounding each
monthly average to the nearest one-hundredth of one percent. The short-
term savings bond rate is then determined by taking 85 percent of the
3-month average and rounding the result to the nearest one-hundredth of
one percent. If the regularly scheduled date for the announcement (for
example, May 1) is a day when the Treasury is not open for business,
then the announcement is made on the next business day and is effective
as of the first day of that month. For bonds entitled to interest
accruals at the short-term savings bond rate, that rate applies to the
bond's first full semiannual interest accrual period following each
announcement of the rate.
Long-Term Savings Bond Rate. No less frequently than on each May 1
and November 1, Treasury announces a long term-savings bond rate. To
determine this rate, Treasury compiles 5-year Treasury securities rates
as of the close of business for each day of the previous six months and
calculates the monthly average for each month, rounding each monthly
average to the nearest one-hundredth of one percent. The long-term
savings bond rate is then determined by taking 85 percent of the 6-
month average and rounding the result to the nearest one-hundredth of
one percent. If the regularly scheduled date for the announcement (for
example, May 1) is a day when the Treasury is not open for business,
then the announcement is made on the next business day and is effective
as of the first day of that month. For bonds entitled to interest
accruals at the long-term savings bond rate, that rate applies to the
bond's first full semiannual interest accrual period following each
announcement of the rate.
Base Denomination. All redemption value calculations are performed
on a hypothetical denomination of $25, having a value at the beginning
of the first earning period equal to an issue price of $12.50.
Redemption values for bonds of greater denominations are in direct
proportion according to the ratio of denominations. For example, if the
value of a hypothetical $25 denomination is $26.80--i.e., $12.50 issue
price plus $14.30 accrued interest--the value of a $50 bond is $26.80
x (50 25), or $53.60.
Semiannual Earning Periods and Accrual Dates. Bonds bearing May 1,
1995, and later issue dates, earn interest during each successive 6-
month period from date of issue to final maturity. Interest accrues,
immediately following each earning period, on each semiannual
anniversary of the date of issue, including the date of final maturity.
Original Maturity. Original maturity occurs at 17 years after date
of issue. The redemption value of a bond at original maturity shall not
be less than the face amount (denomination) of the bond.
Final Maturity. Final maturity occurs at 30 years after the date of
issue. Bonds cease to earn interest at final maturity.
Interest Rate and Redemption Values for Bonds Through Original
Maturity. Short-term saving bond rates are used to determine the
increase in redemption values for each semiannual accrual date
occurring on or before 5 years from the date of issue. For a bond
outstanding [[Page 15431]] more than five years through original
maturity, long-term savings bond rates are used to determine the
increase in redemption values for each semiannual accrual date
occurring after 5 years from the date of issue.
Interest Rate and Redemption Values for Bonds During An Extended
Maturity Period. From 17 years after date of issue to the final
maturity date, the bond continues to earn interest and ceases to earn
interest at final maturity.
Outstanding Savings Bonds. No changes are made to the terms and
conditions for outstanding bonds or to the regulations governing the
offering of Series E, H and HH savings bonds in 31 CFR parts 316, 332,
and 352, respectively, and savings notes in 31 CFR part 342, as a
result of the repeal of paragraph (b)(2) of 31 U.S.C. 3105 and the
amendment to 31 CFR part 351.
Procedural Requirements
It has been determined that this Final Rule is not a significant
regulatory action as defined in Executive Order 12866. Therefore, an
assessment of anticipated benefits, costs and regulatory alternatives
is not required.
This rule relates to matters of public contract, as well as the
borrowing power and fiscal authority of the United States. The notice
and public procedures requirements of the Administrative Procedure Act
are inapplicable, pursuant to 5 U.S.C. 553(a)(2). As no notice of
proposed rulemaking is required, the provisions of the Regulatory
Flexibility Act (5 U.S.C. 601, et seq.) do not apply.
There are no collections of information required by this Final
Rule, and, therefore, no approval pursuant to the Paperwork Reduction
Act, is required.
List of Subjects in 31 CFR Part 351
Bonds, Government Securities.
Dated: March 10, 1995.
Gerald Murphy,
Fiscal Assistant Secretary.
For the reasons set forth in the preamble, Part 351 of Title 31 of
the Code of Federal Regulations is amended as follows:
PART 351--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES EE
1. The authority citation for part 351 is revised to read as
follows:
Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.
2. Section 351.0 is amended, in the second sentence, by removing
``March 1, 1993'', and adding in its place ``May 1, 1995.''
3. Section 351.2(c) is amended as follows:
A. Adding at the end of the heading ``for bonds issued prior to May
1, 1995'';
B. In the second sentence, after ``Series EE bonds'', by adding
``issued prior to May 1, 1995,'';
C. In the table, in the first column, last line, by revising ``Mar.
1993, and thereafter'' to read ``Mar. 1993-Apr. 1995''; and
D. In the table, in the second column, last line, by revising
``Mar. 2011, and thereafter'' to read ``Mar. 2011-Apr. 2013''.
4. Section 351.2(e) is amended as follows:
A. In the paragraph heading, by revising the words ``November 1,
1982, or thereafter'' to read ``November 1, 1982 through April 1,
1995.'';
B. The introductory text of paragraph (e) is revised to read as
follows:
* * * * *
(e)* * * The investment yield of a Series EE bond bearing issue
dates of November 1, 1982, through April 1, 1995, from its issue date
to each interest accrual date occurring less than 5 years after issue,
will be as shown in Tables 1, 2, and 3 in the appendix to this part.
* * * * *
C. Removing ``or thereafter'' at the end of the first sentence of
paragraph (e)(1) and adding in its place ``through April 1, 1995'';
D. In paragraph (e)(2)(iii), in the first sentence, after the words
``May 1, 1989,'' by removing ``or thereafter'' and adding in its place
``through April 1, 1995''.
5. Section 351.2(f)(2) is amended by removing ``November 2, 1982''
and adding in its place ``November 1, 1982''.
6. Section 351.2(g) is amended as follows:
A. In the paragraph heading, after ``Extended maturity periods,''
by adding ``for bonds bearing issue dates prior to May 1, 1995'';
B. In the first sentence, by removing ``of 12 years or less'';
C. In the heading of paragraph (g)(2), after ``Extensions
granted,'' adding ``for bonds bearing issue dates prior to May 1,
1995''; and
D. By revising the tables in paragraph (g)(2) to read as follows:
* * * * *
----------------------------------------------------------------------------------------------------------------
Original maturity dates- Final maturity dates--1st
Issues dates--1st day of: Original terms day of: day of:
----------------------------------------------------------------------------------------------------------------
Jan. 1980-Oct. 1980....... 11 years.................. Jan. 1991-Oct. 1991....... Jan. 2010-Oct. 2010.
Nov. 1980-Apr. 1981....... 9 years................... Nov. 1989-Apr. 1990...... Nov. 2010-Apr. 2011.
May 1981-Oct. 1982........ 8 years................... May 1989-Oct. 1990........ May 2011-Oct. 2012.
Nov. 1982-Oct. 1986....... 10 years.................. Nov. 1992-Oct. 1996...... Nov. 2012-Oct. 2016.
Nov. 1986-Feb. 1993....... 12 years.................. Nov. 1998-Feb. 2005...... Nov. 2016-Feb. 2023.
Mar. 1993-Apr. 1995....... 18 years.................. Mar. 2011-Apr. 2013...... Mar. 2023-Apr. 2025
----------------------------------------------------------------------------------------------------------------
Issues dates--1st day of: 1st extended maturity Years to final maturity... Final maturity dates--
dates--. 1st day of:
1st day of:*..............
----------------------------------------------------------------------------------------------------------------
Jan. 1980-Oct. 1980....... Jan. 2001-Oct. 2001....... 9 years................... Jan. 2010-Oct. 2010.
Nov. 1980-Apr. 1981....... Nov. 1999-Apr. 2000....... 11 years.................. Nov. 2010-Apr. 2011.
May 1981-Oct. 1982........ May 1999-Oct. 2000........ 12 years.................. May 2011-Oct. 2012.
Nov. 1982-Oct. 1986....... Nov. 2002-Oct. 2006....... 10 years.................. Nov. 2012-Oct. 2016.
Nov. 1986-Feb. 1993....... Nov. 2008-Feb. 2015....... 8 years................... Nov. 2016-Feb. 2023.
Mar. 1993-Apr. 1995....... Mar. 2021-Apr. 2023....... 2 years................... Mar. 2023-Apr. 2025
----------------------------------------------------------------------------------------------------------------
* At 10 years after original maturity.
* * * * *
E. In the heading of paragraph (g)(3), by adding ``for bonds
bearing issue dates prior to May 1, 1995'' after ``extended maturity
period''.
7. Paragraph 351.2(h) is amended as follows:
A. In the heading, by adding ``for bonds issued prior to May 1,
1995'' after ``Accrual and payment of interest''; [[Page 15432]]
B. In the fifth sentence, after ``For bonds with issue dates'', by
removing ``on and after'' and adding in their place the word ``of'';
and
C. In the fifth sentence, after ``March 1, 1993,'', by adding
``through April 1, 1995,''.
8. Paragraph 351.2(i) is amended as follows:
A. In the heading, by adding ``for bonds issued prior to May 1,
1995'' after ``Tables of redemption values''; and
B. In the first sentence, after ``November 1, 1982,'', by removing
``and thereafter'', and adding in its place ``through April 1, 1995''.
9. A new paragraph (j) is added to Section 351.2 to read as
follows:
* * * * *
(j) Market-based interest rate and redemption values--bonds bearing
issue dates of May 1, 1995, or thereafter. (1) The following
definitions apply for determining the interest rates and redemption
values for bonds bearing issue dates of May 1, 1995, and thereafter:
(i) Market yields. Treasury uses market bid yields for bills,
notes, and bonds to create a yield curve based on the most actively
traded Treasury securities. This curve relates the yield on a security
to its time to maturity. Yields at particular points on the curve are
referred to as ``constant maturity yields'' and are determined by the
Treasury from this daily yield curve. The 6-month and 5-year Treasury
securities rates described below are derived from these yield curves.
(ii) Short-term savings bond rate. No less frequently than on each
May 1 and November 1, Treasury announces a short-term savings bond
rate. To determine this rate, Treasury compiles 6-month Treasury
securities rates as of the close of business for each day of the
previous three months and calculates the monthly average for each
month, rounding each monthly average to the nearest one-hundredth of
one percent. The short-term savings bond rate is then determined by
taking 85 percent of the three-month average and rounding the result to
the nearest one-hundredth of one percent. If the regularly scheduled
date for the announcement (for example, May 1) is a day when the
Treasury is not open for business, then the announcement is made on the
next business day and is effective as of the first day of that month.
For bonds entitled to interest accruals at the short-term savings bond
rate, that rate applies to the bond's first full semiannual interest
accrual period following each announcement of the rate.
(iii) Long-term savings bond rate. No less frequently than on each
May 1 and November 1, Treasury announces a long-term savings bond rate.
To determine this rate, Treasury compiles 5-year Treasury securities
rates as of the close of business for each day of the previous six
months and calculates the monthly average for each month, rounding each
monthly average to the nearest one-hundredth of one percent. The long-
term savings bond rate is then determined by taking 85 percent of the
6-month average and rounding the result to the nearest one-hundredth of
one percent. If the regularly scheduled date for the announcement (for
example, May 1) is a day when the Treasury is not open for business,
then the announcement is made on the next business day and is effective
as of the first day of that month. For bonds entitled to interest
accruals at the long- term savings bond rate, that rate applies to the
bond's first full semiannual interest accrual period following each
announcement of the rate.
(iv) Base denomination. All redemption value calculations are
performed on a hypothetical denomination of $25 having a value at the
beginning of the first earning period equal to an issue price of
$12.50. Redemption values for bonds of greater denominations are in
direct proportion according to the ratio of denominations. For example,
if the value of a hypothetical $25 denomination is $26.80--i.e., $12.50
issue price plus $14.30 accrued interest--on the same redemption date,
the value of a $50 bond bearing the same issue date is $26.80 x (50
25) or $53.60.
(v) Issue date. The issue date of a Series EE bond is the first day
of the month in which payment of the issue price is received by an
authorized issuing agent.
(vi) Semiannual earning periods and accrual dates. Bonds bearing
issue dates of May 1, 1995, and thereafter earn interest during each
successive six month period from date of issue to final maturity.
Interest accrues, immediately following each earning period, on each
semiannual anniversary of the date of issue, including the date of
final maturity.
(vii) Original maturity. Bonds reach original maturity at 17 years
after date of issue.
(viii) Final maturity. Bonds reach final maturity at 30 years after
date of issue. A bond ceases to earn interest at final maturity.
(2) Interest rates and redemption values for bonds held 5 years or
less. The interest rate for a Series EE bond bearing an issue date of
May 1, 1995, or thereafter, for semiannual earning periods during the
first 5 years from date of issue, is the short-term savings bond rate
determined as defined in paragraph (j)(1)(ii) of this section.
Redemption values for semiannual accrual dates occurring on or before 5
years from date of issue are calculated in accordance with paragraph
(j)(5) of this section.
(3) Interest rates and redemption values for bonds held 5 years and
6 months and longer. The interest rate for a Series EE bond bearing an
issue date of May 1, 1995, or thereafter, for semiannual earning
periods beginning 5 years from date of issue through original maturity,
is the long-term savings bond rate determined as defined in paragraph
(j)(1)(iii) of this section. Redemption values for semiannual accrual
dates occurring after 5 years from date of issue, through original
maturity, are calculated in accordance with paragraph (j)(5) of this
section, except that the redemption value at the date of original
maturity, as provided in paragraph (j)(1)(vii) of this section, shall
not be less than the denomination (face amount or face value).
(4) Interest rates and redemption values for bonds during an
extended maturity period. From 17 years after date of issue to the
final maturity date (the ``extended maturity period'') the bond will be
subject to the terms and conditions in effect when it is issued, and
will continue to earn interest as described in paragraph (j)(3) of this
section, unless the terms and conditions applicable to an extended
maturity period are expressly amended prior to the beginning of such
period.
(5) Redemption value calculations. Interest on a bond accrues and
becomes part of the redemption value which is paid when the bond is
cashed. The redemption value of a bond on the accrual date immediately
following each semiannual earning period is determined as follows:
(i) The applicable long-term or short-term savings bond rate for
the semiannual earning period is converted to decimal form by dividing
by 100, and is adjusted to a semiannual rate by dividing by 2.
(ii) Using redemption values for the base denomination, as defined
in paragraph (j)(1)(iv) of this section, this rate is then multiplied
by the redemption value of the bond at the beginning of the semiannual
earning period.
(iii) The resulting interest amount, rounded to the nearest cent,
is added to the redemption value of the bond at the beginning of the
earning period to produce the redemption value at the next semiannual
accrual date. The [[Page 15433]] redemption value of a bond remains
constant between accrual dates.
(6) The Secretary's determination. The determination by the
Secretary of the Treasury, or his delegate, of the market yields, and
the long-term and short-term savings bond rates, shall be final and
conclusive.
(7) Tables of redemption values. Tables of redemption value are
made available by the Bureau of the Public Debt, Parkersburg, West
Virginia 26106-1328, prior to the periods during which the redemption
values are payable.
[FR Doc. 95-7134 Filed 3-21-95; 8:45 am]
BILLING CODE 4810-39-W