[Federal Register Volume 62, Number 3 (Monday, January 6, 1997)]
[Rules and Regulations]
[Pages 846-874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-33396]
[[Page 845]]
_______________________________________________________________________
Part III
Department of the Treasury
_______________________________________________________________________
Fiscal Service
_______________________________________________________________________
31 CFR Part 356
Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and
Bonds (Circular, Public Debt Series No. 1-93); Rule
Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules
and Regulations
[[Page 846]]
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 356
Sale and Issue of Marketable Book-Entry Treasury Bills, Notes,
and Bonds (Department of the Treasury Circular, Public Debt Series No.
1-93)
AGENCY: Bureau of the Public Debt, Fiscal Service, Department of the
Treasury.
ACTION: Final rule.
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SUMMARY: The Department of the Treasury (``Department'' or
``Treasury'') is publishing in final form an amendment to 31 CFR Part
356 (Uniform Offering Circular for the Sale and Issue of Marketable
Book-Entry Treasury Bills, Notes, and Bonds). This amendment makes
changes necessary to accommodate the public offering of new Treasury
inflation-indexed securities by the Department. In addition, the
amendment makes certain technical clarifications and conforming
changes. The proposed rule was published for public comment on
September 27, 1996.
EFFECTIVE DATE: January 6, 1997.
ADDRESS: This rule has been made available for downloading from the
Bureau of the Public Debt web site at the following address:
www.publicdebt.treas.gov.
FOR FURTHER INFORMATION CONTACT: Ken Papaj (Director), Lee Grandy,
Chuck Andreatta or Kurt Eidemiller (Government Securities Specialists),
Bureau of the Public Debt, Government Securities Regulations Staff,
(202) 219-3632.
SUPPLEMENTARY INFORMATION:
I. Background
31 CFR Part 356, also referred to as the uniform offering circular,
sets out the terms and conditions for the sale and issuance by the
Department of the Treasury to the public of marketable Treasury bills,
notes, and bonds. The uniform offering circular, in conjunction with
offering announcements, represents a comprehensive statement of those
terms and conditions.1
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\1\ The uniform offering circular was published as a final rule
on January 5, 1993 (58 FR 412). Amendments to the circular were
published on June 3, 1994 (59 FR 28773), March 15, 1995 (60 FR
13906), July 16, 1996 (61 FR 37007), August 23, 1996 (61 FR 43626),
and October 22, 1996 (61 FR 54908).
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The Department has decided to offer a new type of security,
referred to as a Treasury inflation-indexed security,2 whose
principal value will be adjusted for inflation as measured by the
United States Government. The Department believes the issuance of these
new inflation-indexed securities will reduce interest costs to the
Treasury over the long term and will broaden the types of debt
instruments available to investors in U.S. financial markets.
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\2\ This Part is being revised to accommodate offerings of both
inflation-indexed notes and inflation-indexed bonds in order to give
the Department the flexibility to issue both types of securities in
the future. However, the Department initially plans to offer only
one maturity, a 10-year note. Inflation-indexed securities were
referred to as inflation-protection securities in the proposed rule.
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As explained in more detail below, after considering the comments
provided, Treasury has determined that the structure of the inflation-
indexed securities will remain unchanged from its description in the
proposed rule. The securities will be based, with some modifications,
on the model of the Real Return Bonds currently issued by the
Government of Canada. The principal of the security will be adjusted
for changes in the level of inflation. Semiannual interest payments
will be made based on a constant rate of interest determined at
auction. The index for measuring the inflation rate for these
securities will be the non-seasonally adjusted U.S. City Average All
Items Consumer Price Index for All Urban Consumers (``CPI'' or ``CPI-
U'') published monthly by the Bureau of Labor Statistics of the U.S.
Department of Labor.
Further, the Department has announced its intention to begin
auctioning inflation-indexed securities in January 1997 and quarterly
thereafter. The first auction will be of 10-year inflation-indexed
notes. Specific terms and conditions of each issue, including the
auction date, issue date, and public offering amount, will be announced
prior to each auction. Over time, the Department expects to offer
additional maturities of inflation-indexed securities, such as 30-year
bonds or shorter-term notes. The Department expects to offer the first
additional maturity later in 1997.
The inflation-adjusted principal value of the securities can be
obtained for any date by multiplying the stated value at issuance, or
par amount, by the index ratio applicable to that date. The index ratio
is the reference CPI applicable to a particular valuation date divided
by the reference CPI applicable to the original issue date. The
inflation adjustment to the principal will not be payable until
maturity, when the securities will be redeemed at the greater of their
inflation-adjusted principal amount or par amount. The securities will
be issued with a stated rate of interest that remains constant until
maturity. Interest payments for a particular security will be
determined by multiplying the inflation-adjusted principal by one-half
of the stated rate of interest on each semiannual interest payment
date.
Inflation-indexed notes will be issued with maturities of at least
one year but not more than ten years. Inflation-indexed bonds, when
offered, will be issued with maturities of more than ten years. The
inflation-indexed securities will be sold at discount, par, or premium
and will pay interest semiannually. The auctions for inflation-indexed
securities will be conducted as single-price auctions in which
competitive bidders will bid in terms of a desired real yield (yield
prior to inflation adjustment), expressed as a percentage with three
decimals, e.g., 3.230%. The interest rate established as a result of
the auction will generally be set at one-eighth of one percent
increments that produce the price closest to, but not above, par when
evaluated at the highest real yield at which bids were accepted. The
offering announcement issued by the Department for each new inflation-
indexed security will contain the specific details for that offering.
The inflation-indexed securities will be eligible for the STRIPS
program (Separate Trading of Registered Interest and Principal of
Securities) immediately upon their issuance by the Treasury.
The securities will also be eligible to serve as collateral for
Treasury programs (e.g., Treasury Tax and Loan accounts). Anyone
interested in the use of inflation-indexed securities for such
collateral purposes should contact the Department's Office of the
Fiscal Assistant Secretary for more information. The Department also
intends to make components stripped from these securities eligible for
collateral at a later date. The Department will notify the public of
their eligibility when the valuation of the stripped components for
collateral purposes has been determined.
II. Comments Received in Response to the Proposed Rule
The Department published for public comment a proposed amendment to
the uniform offering circular on September 27, 1996,3 which laid
out the proposed structure, design, terms, and conditions of the new
inflation-indexed security. The closing date for comments was October
28, 1996. A few minor typographical and technical errors in the
proposed rule text and formulas were subsequently corrected and
[[Page 847]]
changed in a correction notice published on October 4, 1996.4
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\3\ 61 FR 50924 (September 27, 1996).
\4\ 61 FR 51851 (October 4, 1996).
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In developing the proposed rule, the Department took into
consideration the numerous comments, suggestions, and recommendations
that were received in response to two Advance Notices of Proposed
Rulemakings; 5 at more than 30 meetings attended by more than 800
investors, dealers and interested parties in nine cities world-wide;
and at a public symposium sponsored by the Department. The Department
believes that this extensive discussion with, and participation by,
market participants in the design of the inflation-indexed security was
extremely useful in developing a new investment product that will have
wide acceptance and broad market appeal.
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\5\ 61 FR 25164 (May 20, 1996) and 61 FR 38127 (July 23, 1996).
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The Department received eight letters from seven commenters in
response to the proposed rule.6 The letters, listed
chronologically in order of date received, were submitted by Apex
Investment Associates, Inc.; Reed Smith Shaw & McClay; Wrightson
Associates; L. Napoleon Cooper (two letters); Robert L. Elgin; HSBC
Securities, Inc.; and PSA The Bond Market Trade Association.7
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\6\ The comment letters are available to the public for
inspection and downloading on the Internet, at the address provided
earlier in this rule, and for inspection and copying at the Treasury
Department Library, Room 5030, Main Treasury Building, 1500
Pennsylvania Avenue NW., Washington, DC. 20220.
\7\ See letters from Alexander A. Lothan, President, Apex
Investment Associates, Inc. (September 26, 1996); William Morris,
Reed Smith Shaw & McClay (September 27, 1996); Louis Crandall,
Wrightson Associates (October 21, 1996); L. Napoleon Cooper (October
23 and November 12, 1996); Robert L. Elgin (October 25, 1996);
Robert D. Sbarra, Chief Operating Officer-Fixed Income, HSBC
Securities, Inc. (October 25, 1996); Edwin F. Payne, Chairman, PSA
Government and Federal Agency Division, PSA The Bond Market Trade
Association (November 6, 1996).
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Two commenters proposed an entirely different security structure.
One of these commenters submitted a proposal that would allow for a new
series of federal debt, and would result in a substantially different
structure. The other commenter proposed a structure for, and suggested
features to be incorporated in, a non-marketable, floating rate,
inflation-indexed savings bond. A third commenter expressed support for
the process of involving market participants in the design and
implementation of these securities, and stated, ``as far as the
securities themselves are concerned, there is little or nothing we
would care to ask be changed.'' It was this commenter's view, however,
that the stripped securities as designed would not provide for a very
liquid market because of the lack of fungibility of the inflation-
indexed stripped components. The commenter proposed and described an
inflation-indexed ``strip that would be entirely fungible with other
inflation-protection strips.'' Under the commenter's proposal, the
inflation-indexed securities would be stripped into pieces of equal
``real'' value. The commenter indicated that its approach to creating
fungible STRIPS would require that Treasury relax its requirement that
STRIPS be sold in $1,000 increments.
Two of the remaining commenters confined their comments to taxation
issues. One of these commenters expressed its belief that inflation-
indexed securities would be a great success, but that the inflation
adjustment to the principal should be treated as a capital gain or as
taxable income at either redemption or sale by the investor. The other
commenter recommended that, before inflation-indexed securities are
offered to the public, Treasury should ask Congress to provide
statutory authority to exclude the inflation adjustment from taxation.
The commenter said that, without such an exclusion, taxable investors
would receive less than full inflation protection.
One commenter specifically addressed the subject of reopenings of
the security as stated in the proposed rule. In its letter, the
commenter stated its belief that it is extremely important to reopen
inflation-indexed securities to consolidate issues, especially since
stripped coupons from different inflation-indexed securities will not
be interchangeable. The commenter indicated that rules in the tax code
restrict reopenings of conventional bonds that might otherwise be
desirable, and stated that this may also be true for inflation-indexed
securities. The commenter offered two alternatives to resolve this
``original-issue-discount'' or ``OID'' problem. One alternative would
be to relax the OID restrictions for inflation-indexed securities. A
second alternative would be to make an adjustment to the current
single-price auction procedures so that the coupon rate would be
rounded up instead of down. As a result, the initial price would always
be at or above par, causing the new security to be issued further above
the OID limit and thus making it easier to reopen.
Another letter, submitted by an industry trade association, had the
following comments. While expressing support for particular design
details of the security (e.g., modelling the securities on Canada's
Real Return Bonds, selecting the CPI-U as the inflation index, adopting
a current auction technique and making the securities eligible for
stripping), the commenter stressed its concern and belief ``that there
are a number of market practice, regulatory, operational and technical
issues which must be resolved in order to foster a smooth and orderly
auction and efficient secondary market for the new securities in
January.'' To this end, ``firms will have to make significant changes
to their internal trading, trade processing, settlement, risk
management, accounting, regulatory and tax reporting systems, among
others, leaving market participants little time to build, test, and
implement such internal systems changes before trading in the new
securities commences in January.'' The commenter indicated that it
previously advised Treasury that its members would need approximately
six months from publication of the final rules to prepare for trading,
clearance and settlement of the new securities.
The letter highlighted the commenter's specific concerns, which
included: (1) The timing of the planned first issue; (2) a preference
to have more time to program systems based on the final rules and more
time to study the Boskin Commission's Report (methodology for
calculating the CPI which was released on December 4); (3) the lack of
fungibility of stripped interest components and its potential affect on
liquidity, and the need to devise a viable method to create fungible
strips; and (4) the need for a market convention for the appropriate
factor or formula, preferably to be provided by Treasury, for valuing
stripped interest components.
The letter recommended that Treasury should: (1) Provide a monthly
publication of reference CPI numbers for at least the preceding three
months as well as a monthly publication of daily index ratios; (2)
maintain a permanent and public record of all reference CPI numbers
ever used to provide for a single reference source; (3) clarify in the
final rules that, in the event of any discrepancies between CPI numbers
published by the Bureau of Labor Statistics of the U.S. Department of
Labor and the Treasury, those published by Treasury will take
precedence; (4) clarify in the final rules the payment of the minimum
guarantee; (5) add to the final rules hypothetical examples and sample
calculations; and (6) with other regulators, provide formal guidance as
to how the securities are required to be valued, recorded and reported
under different regulatory regimes.
[[Page 848]]
III. Changes from the Proposed Rule
A. General
After taking into consideration the comments received, the
Department is adopting as a final rule this amendment to the uniform
offering circular setting out the terms, conditions and features of
Treasury inflation-indexed securities. The final rule adopts the
proposed rule without significant changes. A summary of the main
features of the final rule that remain unchanged from the proposed rule
are: (1) The inflation-indexed securities will be structured similarly
to the Real Return Bonds issued by the Government of Canada; (2) the
interest rate, which is set at auction, will remain fixed throughout
the life of the security while the principal amount of the security
will be adjusted for inflation, and interest payments will be based on
the inflation-adjusted principal at the time the interest is paid; (3)
the non-seasonally adjusted CPI-U will be the inflation index; (4) the
auction process will use a single-price auction method that is the same
as that currently used for two-year and five-year Treasury notes; and
(5) inflation-indexed securities will be eligible immediately for
stripping into their principal and interest components.
The proposed changes in Secs. 356.2; 356.3; 356.5; 356.10; 356.12;
356.13; 356.20; 356.32; Appendix B, Section I, Paragraphs A and C;
Appendix B, Section II; Appendices C and D; and Exhibit A, Section IV
are being adopted as originally proposed. Readers should refer to the
preamble of the proposed rule 8 for a description of the above
provisions being adopted in this final rule.
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\8\ See supra note 3.
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B. Section 356.17 Responsibility for Payment
The proposed rule, in paragraphs 356.17 (a) and (b), contained
minor conforming clarifications to reflect that bidders submitting
payment with their tender may have to include, in addition to announced
accrued interest, an inflation-adjustment amount with their payment.
The wording in paragraphs (a) and (b) has been modified from the
proposed rule to reflect a recent amendment to the offering circular,
which added payment by authorized electronic means as a payment
option.9
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\9\ 61 FR 54908 (October 22, 1996).
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C. Section 356.25 Payment for Awarded Securities
In the proposed rule, a conforming change was made to paragraph
356.25(a)(2) to state that additional amounts due at settlement may
include inflation adjustments. The proposed rule also added a new
paragraph (c) to provide that the payment amount for awarded securities
will be the settlement amount, as that term is defined in Sec. 356.2.
The substance of these two provisions remains unchanged in the final
rule. However, in the final rule, new paragraph (c) has been
redesignated as paragraph (d) to reflect a recent amendment to the
uniform offering circular authorizing payment by electronic
means,10 which was effective after publication of the proposed
rule.
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\10\ Id.
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D. Section 356.30 Payment of Principal and Interest on Notes and Bonds
Proposed paragraph 356.30(b) has been modified in accordance with
one commenter's suggestion that the Department make clear in this
section its obligation to pay at maturity the greater of the inflation-
adjusted principal amount or par amount.
E. Section 356.31 STRIPS
No substantive changes have been made in this section from the
proposed rule, which permits inflation-indexed securities to be
stripped into separate principal and interest components. Unlike the
conventional STRIPS program in which interest components having the
same payment/maturity date are fungible (i.e., have the same CUSIP
number), interest components stripped from different inflation-indexed
securities will not be fungible even if they have the same payment/
maturity date.
Some commenters have maintained that the creation of fungible
stripped interest components is essential to provide sufficient
liquidity in the market for these components. One commenter provided an
alternative method that would achieve fungibility for inflation-indexed
interest components. This method was supported by a second commenter.
The Department understands these concerns and strongly supports the
development of an active, liquid market for inflation-indexed
securities, including their stripped components. Making the securities
attractive to a broad investor base and ensuring the development of a
liquid market have been two of Treasury's primary objectives throughout
the securities' design and development. The Department is evaluating
alternative methodologies, including the recommendation mentioned
above, for creating fungible stripped interest components from
inflation-indexed securities. However, we are not yet in a position to
adopt a methodology that would permit fungibility. We have decided to
proceed with the STRIPS program as described in the proposed rule and
will continue to work on making interest components fungible in a
manner that is operationally feasible. We believe that this approach is
preferable to not having the securities strippable at the time they are
first offered.
F. Section 356.32 Taxation
No change has been made to this section from the proposed rule.
However, readers should note that they are directed in paragraph (b) to
the relevant Internal Revenue Service (IRS) regulations for further
information about the tax treatment, and reporting, of inflation-
indexed securities. The IRS rules are expected to be publicly available
and published in the Federal Register at the same time as this final
rule is published, or shortly thereafter. The IRS regulations will be
issued under Secs. 1275(d) and 1286 of the Internal Revenue Code.
In the meantime, prospective investors are advised to refer to IRS
Notice 96-51 published in the Internal Revenue Bulletin 1996-42
(October 15, 1996) for information regarding taxation of inflation-
indexed securities and the stripped components of such securities.
Additionally, in September, Treasury issued a statement providing an
explanation of the federal income tax treatment for these securities
and their stripped components. Readers interested in receiving a copy
of this statement should call the Department's Office of Public Affairs
automated facsimile system at 202-622-2040 and request Document No.
1290.
The Department also wishes to respond to the concern expressed by
one of the commenters regarding rules in the tax code that could limit
Treasury's ability to reopen issues of inflation-indexed securities. We
note that the IRS regulations will permit reopenings of inflation-
indexed securities without regard to the OID rules, provided that the
reopenings occur not more than one year after the original securities
were first issued to the public.
G. Appendix B, Section I, Paragraph B
In the proposed rule, Treasury stated that it did not intend to
publish the index ratio for use by market participants. However, in the
preamble, the Department specifically asked for comments on whether a
monthly publication of the daily index ratios or
[[Page 849]]
reference CPIs would be useful to market participants. One of the
commenters strongly urged that Treasury publish both the reference CPI
numbers for at least the three preceding months and the daily index
ratios on a month-to-month basis. Treasury will support this request.
Although Appendix B has been revised by deleting the language from the
proposed rule and is now silent with respect to publication of the
daily index ratios, Treasury intends to provide monthly the daily
reference CPI numbers and the daily index ratios on a pilot basis for
one year. This information will be available through such means as a
monthly press release, the Internet, and automated facsimile systems.
After a year, the Department will determine whether there is still
a need for this information to be provided by Treasury. It is our
understanding that most market participants will incorporate the
formulas for calculating the reference CPIs and index ratios into their
trading or other automated systems. Additionally, it is reasonable to
expect that the major electronic financial service providers (e.g.,
Bloomberg, Telerate, Reuters) will provide this information, or
substantially similar information, to their subscribers. Further,
Treasury will maintain an archival record of the reference CPIs and the
daily index ratios throughout the life of each inflation-indexed
security. This information will be readily available to market
participants.
In addition to the publication of reference CPIs and index ratios,
the Treasury will provide monthly the non-seasonally adjusted CPI for
each of the prior three months.
Changes have been made to the paragraph that addresses index
contingencies. Language has been revised to clarify Treasury's course
of action if the CPI is: Discontinued, or in the judgment of the
Secretary, either fundamentally altered in a manner materially adverse
to the interests of an investor in the security or altered by
legislation or Executive Order in a manner materially adverse to the
interests of an investor in the security.
A change to the CPI would be considered fundamental if it affected
the character of the CPI. Technical changes made by the Bureau of Labor
Statistics (BLS) to the CPI to improve its accuracy as a measure of the
cost of living would not be considered fundamental changes. Technical
changes include, but are not limited to, changes in: (1) The specific
items (e.g., apples or major appliances) to be priced for the index;
(2) the way individual price quotations are aggregated to construct
component price indices for these items (aggregation of item sub-
strata); (3) the method for combining these component price indices to
obtain the comprehensive, all-items CPI (aggregation of item strata);
and (4) the procedures for incorporating new goods into the index and
making adjustments for quality changes in existing goods.
Technical changes to the CPI previously made or announced by BLS
include introducing probability sampling to select the precise items
for which prices are collected and the stores in which collection takes
place, and changing the way in which price movements of major
components, such as shelter costs for homeowners in the early 1980s and
medical care costs beginning in 1997, are measured.
The Advisory Commission to Study the Consumer Price Index (the
Boskin Commission) made a number of recommendations to improve the
calculation of changes in the cost of living. Some of these
recommendations were directed to BLS and were designed to improve the
calculation of the monthly CPI. These recommendations, if and to the
extent implemented by BLS, would constitute technical changes rather
than fundamental changes.
The Boskin Commission also recommended construction of an annual
measure of the cost of living as a supplement to the monthly CPI.
Development and use of such a supplement, by itself, would not change
the monthly CPI itself. While the Boskin Commission did not suggest
that such a measure replace the CPI, a decision by BLS to replace,
rather than supplement, the current monthly CPI with an annual measure
of consumer prices, would constitute a fundamental change.
In addition, if the Secretary determines that the CPI is altered by
legislation or Executive Order in a manner that is materially adverse
to the interests of an investor in the security, the Secretary would
propose an alternative index.
A minor, technical change has also been made to clarify Treasury's
intention in the situation where the CPI for a particular month is not
reported by the last day of the following month. In such a situation,
the last CPI that has been reported (including any revision of a
previously reported CPI number) will be used to calculate CPI numbers
for months for which the CPI has not been reported by such day.
H. Appendix B, Section III
Minor, technical changes have been made to certain formulas and
examples by adding a definition of one variable, and by elaborating on
the definitions of two other variables.
I. Other Issues
One commenter raised a number of issues pertaining to the
regulatory treatment of inflation-indexed securities, which are outside
the scope of the uniform offering circular regulations. Specifically,
the commenter questioned how these securities are to be valued,
recorded and reported under various regulatory regimes for purposes
such as large position reporting, determining regulatory capital and
margin amounts, and broker-dealer reporting. The Treasury has given
informal, general guidance on some of these issues as they pertain to
the Government Securities Act (GSA) regulations, 17 CFR Chapter IV,
(e.g., large position reporting, capital and haircut treatment,
recordkeeping and financial reporting), and will respond to additional
questions as they arise. The Treasury is also considering issuing an
interpretation of the GSA regulations to provide formal clarification
and guidance on regulatory issues within the scope of its authority.
Additionally, Treasury has been coordinating and consulting with other
regulators, such as staff of the Securities and Exchange Commission,
the Board of Governors of the Federal Reserve System, and the Federal
Reserve Bank of New York, to address the various regulatory issues
raised by the commenter and to foster consistent regulatory treatment
where possible and appropriate.
The commenter also raised concerns that a number of questions
remain unanswered regarding market practice, trading, accounting and
operational issues related to the new securities. While these issues
are also outside the scope of both the uniform offering circular rules
and Treasury's authority under the GSA, Treasury appreciates the need
for consistent and widely accepted trading practices and industry
conventions for quoting, pricing, and valuing inflation-indexed
securities. Treasury strongly supports and encourages industry efforts,
including the formation of the PSA Inflation Bond Trading Practices
Task Force, to develop trading and market practice conventions. We are
confident the industry will be successful in this effort and we will
continue to provide guidance as needed.
IV. Procedural Requirements
This final rule does not meet the criteria for a ``significant
regulatory action'' pursuant to Executive Order 12866.
[[Page 850]]
Although this rule was issued in proposed form to secure the
benefit of public comment, the notice and public comment procedures
requirements of the Administrative Procedure Act are inapplicable,
pursuant to 5 U.S.C. 553(a)(2).
As no notice of proposed rulemaking was required, the provisions of
the Regulatory Flexibility Act (5 U.S.C. 601, et seq.) do not apply.
There is no new collection of information contained in this rule,
and, therefore, the Paperwork Reduction Act does not apply. The
collections of information of 31 CFR Part 356 have been previously
approved by the Office of Management and Budget under section 3507(d)
of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) under
control number 1535-0112. Under this Act, an agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it displays a valid OMB control number.
List of Subjects in 31 CFR Part 356
Bonds, Federal Reserve System, Government securities, Securities.
Dated: December 30, 1996.
Donald V. Hammond,
Deputy Fiscal Assistant Secretary.
For the reasons set forth in the preamble, 31 CFR Chapter II,
Subchapter B, Part 356, is amended as follows:
PART 356--SALE AND ISSUE OF MARKETABLE BOOK-ENTRY TREASURY BILLS,
NOTES, AND BONDS (DEPARTMENT OF THE TREASURY CIRCULAR, PUBLIC DEBT
SERIES NO. 1-93)
1. The authority citation for part 356 continues to read as
follows:
Authority: 5 U.S.C. 301; 31 U.S.C. 3102, et seq.; 12 U.S.C. 391.
2. Section 356.2 is amended by revising the definitions of
``Accrued interest,'' ``Book-entry security,'' ``Customer,'' ``Interest
rate,'' ``Multiple-price auction,'' ``Par amount,'' ``Settlement
amount,'' ``STRIPS,'' and ``Yield;'' and adding in alphabetical order
the definitions of ``Business day,'' ``Consumer Price Index,'' ``Daily
interest decimal,'' ``Index,'' ``Index ratio,'' ``Inflation-adjusted
principal,'' ``Real yield,'' and ``Reference CPI'' to read as follows:
Sec. 356.2 Definitions.
* * * * *
Accrued interest means an amount payable to the Department for such
part of the next semiannual interest payment that represents interest
income attributed to the period prior to the date of issue. (See
Appendix B, Section I, Paragraph C.)
* * * * *
Book-entry security means a security the issuance and maintenance
of which are represented by an accounting entry or electronic record
and not by a certificate. Treasury book-entry securities may generally
be held in either TRADES or in TREASURY DIRECT. (See Sec. 356.3.)
Business day means any day other than a Saturday, Sunday, or other
day on which the Federal Reserve Banks are not open for business.
* * * * *
Consumer Price Index (CPI) means the monthly non-seasonally
adjusted U.S. City Average All Items Consumer Price Index for All Urban
Consumers, published by the Bureau of Labor Statistics of the
Department of Labor. (See Appendix D.)
* * * * *
Customer means a bidder on whose behalf a depository institution or
dealer has been directed to submit or forward a competitive or
noncompetitive bid for a specified amount of securities in a specific
auction. Only depository institutions and dealers may submit or forward
bids for customers, whether directly to a Federal Reserve Bank or the
Bureau of the Public Debt, or through an intermediary depository
institution or dealer.
Daily interest decimal means, for a fixed-principal security, the
interest factor attributable to one day of an interest payment period
per $1,000 par amount.
* * * * *
Index means the Consumer Price Index, which is used as the basis
for making adjustments to principal amounts of inflation-indexed
securities. (See Appendix D.)
Index ratio means, for any particular date and any particular
inflation-indexed security, the Reference CPI applicable to such date
divided by the Reference CPI applicable to the original issue date (or
dated date, when the dated date is different from the original issue
date). (See Appendix B, Section I, Paragraph B.)
Inflation-adjusted principal means, for an inflation-indexed
security, the value of the security derived by multiplying the par
amount by the applicable index ratio as described in Appendix B,
Section I, Paragraph B.
Interest rate means the annual percentage rate of interest paid on
the par amount or the inflation-adjusted principal of a specific issue
of notes or bonds. (See Appendix B for methods and examples of interest
calculations on notes and bonds.)
* * * * *
Multiple-price auction means an auction in which each successful
competitive bidder pays the price equivalent to the yield or rate that
it bid.
* * * * *
Par amount means the stated value of a security at original
issuance.
* * * * *
Real yield means, for an inflation-indexed security, the yield
based on the payment stream in constant dollars, i.e., before
adjustment by the index ratio.
Reference CPI (Ref CPI) means, for an inflation-indexed security,
the index number applicable to a given date. (See Appendix B, Section
I, Paragraph B.)
* * * * *
Settlement amount means the par amount of securities awarded less
any discount amount and plus any premium amount and/or any accrued
interest. For inflation-indexed securities, the settlement amount also
includes any inflation adjustment when such securities are reopened or
when the dated date is different from the issue date.
* * * * *
STRIPS (Separate Trading of Registered Interest and Principal of
Securities) means the Department's program under which eligible
securities are authorized to be separated into principal and interest
components, and transferred separately. These components are maintained
in book-entry accounts, and transferred, in TRADES.
* * * * *
Yield, also referred to as ``yield to maturity,'' means the
annualized rate of return to maturity on a fixed-principal security
expressed as a percentage. For an inflation-indexed security, yield
means the real yield. (See Appendix B.)
3. Section 356.3 is amended by revising the introductory paragraph
and the heading of paragraph (a) and removing footnote 1; adding three
sentences at the end of paragraph (a); and adding a second sentence at
the end of paragraph (b), to read as follows:
Sec. 356.3 Book-entry securities and systems.
Securities issued subject to this Part shall be held and
transferred in either of the two book-entry securities systems--TRADES
or TREASURY DIRECT--described in this section. Securities are
maintained and transferred, to the extent authorized in 31 CFR part
357, in these two book-entry systems at their par amount, e.g., for
inflation-indexed
[[Page 851]]
securities, adjustments for inflation will not be included in this
amount. Securities may be transferred from one system to the other in
accordance with Treasury regulations governing book-entry Treasury
bills, notes, and bonds. See Department of the Treasury Circular,
Public Debt Series No. 2-86, as amended (31 CFR Part 357).
(a) Treasury/Reserve Automated Debt Entry System (TRADES). * * *
For accounts maintained in TRADES, Treasury discharges its payment
obligations when payment is credited to the applicable account
maintained at a Federal Reserve Bank or payment is made in accordance
with the instructions of the person or entity maintaining such account.
Further, neither Treasury nor the Federal Reserve Banks have any
obligations to, nor will they recognize any claims of, any person or
entity that does not have an account at a Federal Reserve Bank. In
addition, neither Treasury nor the Federal Reserve Banks will recognize
the claims of any person or entity with respect to any accounts not
maintained at a Federal Reserve Bank.
(b) * * * In TREASURY DIRECT, Treasury discharges its payment
obligations when payment is made to a depository institution for credit
to the account specified by the owner of the security, or when payment
is made in accordance with the instructions of the owner of the
security.
* * * * *
4. Section 356.5 is amended by revising the introductory text and
paragraphs (b) and (c) to read as follows:
Sec. 356.5 Description of securities.
Securities offered pursuant to this Part are offered exclusively in
book-entry form and are direct obligations of the United States, issued
under Chapter 31 of Title 31 of the United States Code. The securities
are subject to the terms and conditions set forth in this Part,
including the appendices, as well as the regulations governing book-
entry Treasury bills, notes, and bonds (31 CFR Part 357), and the
offering announcements, all to the extent applicable. When the
Department issues additional securities with the same CUSIP number as
outstanding securities, all securities with the same CUSIP number are
considered the same security.
* * * * *
(b) Treasury notes.
(1) Treasury fixed-principal 1 notes. Treasury fixed-principal
notes are issued with a stated rate of interest to be applied to the
par amount, have interest payable semiannually, and are redeemed at
their par amount at maturity. They are sold at discount, par, or
premium, depending upon the auction results. They have maturities of at
least one year, but not more than ten years.
---------------------------------------------------------------------------
\1\ The term ``fixed-principal'' is used in this Part to
distinguish such securities from ``inflation-indexed'' securities.
Fixed-principal notes and fixed-principal bonds are referred to as
``notes'' and ``bonds'' in official Treasury publications, such as
offering announcements and auction results press releases, as well
as in auction systems.
---------------------------------------------------------------------------
(2) Treasury inflation-indexed notes. Treasury inflation-indexed
notes are issued with a stated rate of interest to be applied to the
inflation-adjusted principal on each interest payment date, have
interest payable semiannually, and are redeemed at maturity at their
inflation-adjusted principal, or at their par amount, whichever is
greater. They are sold at discount, par, or premium, depending upon the
auction results. They have maturities of at least one year, but not
more than ten years. (See Appendix B for price and interest payment
calculations and Appendix C for Investment Considerations.)
(c) Treasury bonds.
(1) Treasury fixed-principal bonds. Treasury fixed-principal bonds
are issued with a stated rate of interest to be applied to the par
amount, have interest payable semiannually, and are redeemed at their
par amount at maturity. They are sold at discount, par, or premium,
depending upon the auction results. They typically have maturities of
more than ten years.
(2) Treasury inflation-indexed bonds. Treasury inflation-indexed
bonds are issued with a stated rate of interest to be applied to the
inflation-adjusted principal on each interest payment date, have
interest payable semiannually, and are redeemed at maturity at their
inflation-adjusted principal, or at their par amount, whichever is
greater. They are sold at discount, par, or premium, depending upon the
auction results. They typically have maturities of more than ten years.
(See Appendix B for price and interest payment calculations and
Appendix C for Investment Considerations.)
5. Section 356.10 is amended by adding a sentence at the end of the
paragraph, before the parenthetical last sentence, to read as follows:
Sec. 356.10 Offering announcement.
* * * Accordingly, bidders should read the applicable offering
announcement in conjunction with this Part. * * *
6. Section 356.12 is amended by revising the first sentence of
paragraph (a); revising paragraphs (b)(2), (c)(1)(i) and (ii); and
adding new paragraph (c)(1)(iii) to read as follows:
Sec. 356.12 Noncompetitive and competitive bidding.
(a) General. All bids, including bids for reopenings, must state
the par amount of securities bid for and must equal or exceed the
minimum bid amount stated in the offering announcement. * * *
(b) * * *
(2) Additional restrictions. A bidder may not bid noncompetitively
for its own account if, in the security being auctioned, it holds or
has held a position in when-issued trading or in futures or forward
contracts at any time between the date of the offering announcement and
the designated closing time for the receipt of competitive tenders. * *
*
(c) * * *
(1) * * *
(i) Treasury bills. A competitive bid must show the discount rate
bid, expressed with two decimals, e.g., 3.10. Fractions may not be
used.
(ii) Treasury fixed-principal securities. A competitive bid must
show the yield bid, expressed with three decimals, e.g., 4.170.
Fractions may not be used.
(iii) Treasury inflation-indexed securities. A competitive bid must
show the real yield bid, expressed with three decimals, e.g., 3.070.
Fractions may not be used.
* * * * *
7. Section 356.13 is amended by revising paragraph (a) to read as
follows:
Sec. 356.13 Net long position.
(a) Reporting net long positions. When bidding competitively, a
bidder must report the amount of its net long position when the total
of all of its bids in an auction plus the bidder's net long position in
the security being auctioned equals or exceeds the net long position
reporting threshold amount. The threshold amount for any particular
security will be as stated in the offering announcement for that
security. (See Sec. 356.10.) That amount will be $2 billion for bills,
notes, and bonds unless otherwise stated in the offering announcement.
For example, the net long position reporting threshold amount may be
less than $2 billion for smaller security offerings, e.g., certain
inflation-indexed securities or cash management bills. If the bidder
either has no position or has a net short position and the total of all
of its bids equals or exceeds the threshold amount, e.g., $2 billion, a
net long position of zero must be reported. * * *
* * * * *
[[Page 852]]
8. Section 356.17 is amended by revising the last sentence in the
introductory paragraph and the introductory text of paragraphs (a) and
(b) to read as follows:
Sec. 356.17 Responsibility for payment.
* * * The specific requirements, outlined in this section, depend
on whether awarded securities will be delivered in TREASURY DIRECT or
TRADES.
(a) TREASURY DIRECT. For securities to be held in TREASURY DIRECT,
payment of the par amount and announced accrued interest and/or
inflation adjustment, if any, must be submitted with the tender unless
other provisions have been made, such as payment by an authorized
electronic means providing for immediately available funds or by charge
to the funds account of a depository institution.
* * * * *
(b) TRADES. For securities to be held in TRADES, payment of the par
amount and announced accrued interest and/or inflation adjustment, if
any, must be submitted with the tender unless other provisions have
been made, such as payment by an authorized electronic means providing
for immediately available funds or by charge to the funds account of a
depository institution.
* * * * *
9. Section 356.20 is amended by revising the introductory text of
paragraph (c) and adding a sentence to the end of paragraph (c)(2) to
read as follows:
Sec. 356.20 Determination of auction awards.
* * * * *
(c) Determining purchase prices for awarded securities. Price
calculations will be rounded to three decimal places on the basis of
price per hundred, e.g., 99.954. (See Appendix B.)
* * * * *
(2) * * * For inflation-indexed securities, the price of such
securities will be the price equivalent to the highest real yield at
which bids were accepted.
10. Section 356.25 is amended by revising the last sentence in
paragraph (a)(2), and adding paragraph (d) to read as follows:
Sec. 356.25 Payment for awarded securities.
* * * * *
(a) * * *
(2) * * * Such additional amount may be due if the auction
calculations result in a premium or if accrued interest and/or
inflation adjustment is due.
* * * * *
(d) Amount of payment for awarded securities. The payment amount
for awarded securities will be the settlement amount as defined in
Sec. 356.2. (See formulas in Appendix B.)
11. Section 356.30 is amended by redesignating the text of the
current section as (a), adding a heading of ``General'' and revising
the last sentence in newly redesignated paragraph (a), and adding
paragraph (b) to read as follows:
Sec. 356.30 Payment of principal and interest on notes and bonds.
(a) General. * * * In the event any principal or interest payment
date is not a business day, the amount is payable (without additional
interest) on the next business day.
(b) Treasury inflation-indexed securities. At maturity, the
inflation-adjusted principal will be paid, unless the inflation-
adjusted principal is less than the par amount of the security, in
which case an additional amount will be paid at maturity so that the
additional amount plus the inflation-adjusted principal equals the par
amount. If a security has been stripped, any such additional amount
will be paid at maturity to holders of principal components only.
Regardless of whether or not an additional amount is paid, the final
interest payment will be based on the inflation-adjusted principal at
maturity.
12. Section 356.31 is amended by revising paragraph (a) and the
first sentence of paragraph (b), redesignating paragraphs (c) and (d)
as paragraphs (g) and (h) respectively, adding new paragraphs (c)
through (f), adding a third and fourth sentence to newly redesignated
paragraph (g) and revising newly redesignated paragraph (h) to read as
follows:
Sec. 356.31 STRIPS.
(a) General. A note or bond may be designated in the offering
announcement as eligible for the STRIPS program. At the option of the
holder, and generally at any time from its issue date until its call or
maturity, any such security may be ``stripped,'' i.e., divided into
separate principal and interest components. A short or long first
interest payment and all interest payments within a callable period are
not eligible to be stripped from the principal component. The CUSIP
numbers and payment dates for the principal and interest components are
provided in the offering announcement if not previously announced.
(b) Minimum par amounts required for STRIPS. For a note or bond to
be stripped into the components described above, the par amount of the
note or bond must be in an amount that, based on its interest rate,
would produce a semiannual interest payment, before adjustment for
inflation, in a multiple of $1,000. * * *
(c) Principal components stripped from fixed-principal securities.
Principal components stripped from fixed-principal securities are
maintained in accounts, and transferred, in TRADES at their par amount.
The principal components have a CUSIP number that is different from the
CUSIP number of the fully-constituted (unstripped) security.
(d) Interest components stripped from fixed-principal securities.
Interest components stripped from fixed-principal securities are
maintained in accounts, and transferred, in TRADES at their original
payment value, which is derived by applying the semiannual interest
rate to the par amount. When an interest component is created, the
interest payment date becomes the maturity date for the component. All
such components with the same maturity date have the same CUSIP number,
regardless of the underlying security from which the interest payments
were stripped. All interest components have CUSIP numbers that are
different from the CUSIP number of any fully-constituted security and
any principal component.
(e) Principal components stripped from inflation-indexed
securities. Principal components stripped from inflation-indexed
securities are maintained in accounts, and transferred, in TRADES at
their par amount. At maturity, the holder will receive the inflation-
adjusted principal value or the par amount, whichever is greater. (See
Sec. 356.30.) Principal components have a CUSIP number that is
different from the CUSIP number of the fully-constituted security.
(f) Interest components stripped from inflation-indexed securities.
Interest components stripped from inflation-indexed securities are
maintained in accounts, and transferred, in TRADES at their original
payment value, which is derived by applying the semiannual interest
rate to the par amount. When an interest component is created, the
interest payment date becomes the maturity date for the component. Each
such component has a unique CUSIP number that is different from the
CUSIP number of any interest components stripped from different
securities, even if the components have the same maturity date. All
interest components have CUSIP numbers that are different from the
CUSIP number of any fully-constituted security and any principal
[[Page 853]]
component. At maturity, the payment to the holder will be derived by
applying the semiannual interest rate to the inflation-adjusted
principal of the underlying security.
(g) Reconstituting a security. * * * Interest components stripped
from inflation-indexed securities are different from interest
components stripped from fixed-principal securities and, accordingly,
are not interchangeable for reconstitution purposes. Interest
components stripped from one inflation-indexed security are not
interchangeable for reconstitution purposes with interest components
stripped from another inflation-indexed security.
(h) Applicable regulations. Unless otherwise provided in this Part,
notes and bonds stripped into their STRIPS components are governed by
Subparts A, B and D of Part 357 of this title.
13. Section 356.32 is revised to read as follows:
Sec. 356.32 Taxation.
(a) General. Securities issued under this Part are subject to all
applicable taxes imposed under the Internal Revenue Code of 1986, or
successor. Under section 3124 of Title 31, United States Code, the
securities are exempt from taxation by a State or political subdivision
of a State, except for State estate or inheritance taxes and other
exceptions as provided in that section.
(b) Treasury inflation-indexed securities. Special federal income
tax rules for inflation-indexed securities, and principal and interest
components stripped from such securities, are set forth in Internal
Revenue Service regulations.
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18. Part 356 is amended by adding new Appendixes C and D to read as
follows:
Appendix C To Part 356--Investment Considerations
I. Inflation-Indexed Securities
A. Principal and Interest Variability
An investment in securities with principal or interest
determined by reference to an inflation index involves factors not
associated with an investment in a fixed-principal security. Such
factors may include, without limitation, the possibility that the
inflation index may be subject to significant changes, that changes
in the index may or may not correlate to changes in interest rates
generally or with changes in other indices, that the resulting
interest may be greater or less than that payable on other
securities of similar maturities, and that, in the event of
sustained deflation, the amount of the semiannual interest payments,
the inflation-adjusted principal of the security, and the value of
stripped components, will decrease. However, if at maturity the
inflation-adjusted principal is less than a security's par amount,
an additional amount will be paid at maturity so that the additional
amount plus the inflation-adjusted principal equals the par amount.
Regardless of whether or not such an additional amount is paid,
interest payments will always be based on the inflation-adjusted
principal as of the interest payment date. If a security has been
stripped, any such additional amount will be paid at maturity to
holders of principal components only. (See Sec. 356.30.)
B. Trading in the Secondary Market
The Treasury securities market is the largest and most liquid
securities market in the world. While Treasury expects that there
will be an active secondary market for inflation-indexed securities,
that market initially may not be as active or liquid as the
secondary market for Treasury fixed-principal securities. In
addition, as a new product, inflation-indexed securities may not be
as widely traded or as well understood as Treasury fixed-principal
securities. Lesser liquidity and fewer market participants may
result in larger spreads between bid and asked prices for inflation-
indexed securities than the bid-asked spreads for fixed-principal
securities with the same time to maturity. Larger bid-asked spreads
normally result in higher transaction costs and/or lower overall
returns. The liquidity of an inflation-indexed security may be
enhanced over time as Treasury issues additional amounts or more
entities participate in the market.
C. Tax Considerations
Treasury inflation-indexed securities and the stripped interest
and principal components of these securities are subject to specific
tax rules provided by Treasury regulations issued under sections
1275(d) and 1286 of the Internal Revenue Code of 1986, as amended.
D. Indexing Issues
While the CPI measures changes in prices for goods and services,
movements in the CPI that have occurred in the past are not
necessarily indicative of changes that may occur in the future.
The calculation of the index ratio incorporates an approximate
three-month lag, which may have an impact on the trading price of
the securities, particularly during periods of significant, rapid
changes in the index.
The CPI is reported by the Bureau of Labor Statistics, a bureau
within the Department of Labor. The Bureau of Labor Statistics
operates independently of the Treasury and, therefore, Treasury has
no control over the determination, calculation, or publication of
the index. For a discussion of how the CPI will be applied in
various situations, see Appendix B, Section I, Paragraph B. In
addition, for a discussion of actions that Treasury would take in
the event the CPI is: discontinued; in the judgment of the
Secretary, fundamentally altered in a manner materially adverse to
the interests of an investor in the security; or, in the judgment of
the Secretary, altered by legislation or Executive Order in a manner
materially adverse to the interests of an investor in the security,
see Appendix B, Section I, Paragraph B.4.
Appendix D to Part 356--Description of the Consumer Price Index
The Consumer Price Index (``CPI'') for purposes of inflation-
indexed securities is the non-seasonally adjusted U.S. City Average
All Items Consumer Price Index for All Urban Consumers, published
monthly by the Bureau of Labor Statistics of the Department of
Labor. The CPI is a measure of the average change in consumer prices
over time in a fixed market basket of goods and services, including
food, clothing, shelter, fuels, transportation, charges for doctors'
and dentists' services, and drugs.
In calculating the index, price changes for the various items
are averaged together with weights that represent their importance
in the spending of urban households in the United States. The
contents of the market basket of goods and services and the weights
assigned to the various items are updated periodically to take into
account changes in consumer expenditure patterns.
The CPI is expressed in relative terms in relation to a time
base reference period for which the level is set at 100. For
example, if the CPI for the 1982-84 reference period is 100.0, an
increase of 16.5 percent from that period would be shown as 116.5.
The CPI for a particular month is released and published during the
following month. From time to time, the CPI is rebased to a more
recent base reference period. The base reference period for a
particular inflation-indexed security will be provided on the
offering announcement for that security.
Further details about the CPI may be obtained by contacting the
Bureau of Labor Statistics.
19. Exhibit A to Part 356 is amended by adding a new Section IV
to the list of section titles and to the text of Exhibit A to read
as follows:
Exhibit A to Part 356--Sample Announcements of Treasury Offerings to
the Public
* * * * *
IV. Treasury Inflation-Indexed Note Announcement
* * * * *
IV. TREASURY INFLATION-INDEXED NOTE ANNOUNCEMENT
Embargoed Until 2:30 P.M., October 2, 20XX
CONTACT: Office of Financing, 202/219-3350
Treasury to Auction $5,500 Million of 10-Year Inflation-Indexed Notes
The Treasury will auction $5,500 million of 10-year inflation-
indexed notes to raise cash. In addition, there is $7,906 million of
publicly-held securities maturing October 15, 20XX.
In addition to the public holdings, Federal Reserve Banks hold
$327 million of the maturing securities for their own accounts,
which may be exchanged for additional amounts of the new securities.
The maturing securities held by the public include $584 million
held by Federal Reserve Banks as agents for foreign and
international monetary authorities. Amounts bid for these accounts
by Federal Reserve Banks will be added to the offering.
The auction will be conducted in the single-price auction
format. All competitive and noncompetitive awards will be at the
highest yield of accepted competitive tenders.
Tenders will be received at Federal Reserve Banks and Branches
and at the Bureau of the Public Debt, Washington, D.C. This offering
of Treasury securities is governed by the terms and conditions set
forth in the Uniform Offering Circular (31 CFR Part 356) for the
sale and issue by the Treasury to the public of marketable Treasury
bills, notes, and bonds.
Details about the new security are given in the attached
offering highlights.
Highlights of Treasury Offering to the Public of 10-Year Inflation-
Indexed Notes to be Issued October 15, 20XX
October 2, 20XX
Offering Amount: $5,500 million.
Description of Offering:
Term and type of security: 10-year inflation-indexed notes
Series--D-20XX
CUSIP number--912XXX XX X
Auction date--October 9, 20XX
Issue date--October 15, 20XX
Dated date--October 15, 20XX
Maturity date--October 15, 20XX
Interest Rate--Determined based on the highest accepted bid
Real yield--Determined at auction
Interest payment dates: April 15 and October 15.
Minimum bid amount--$1,000
Multiples--$1,000
Accrued interest payable by investor: None.
Premium or discount: Determined at auction.
[[Page 874]]
STRIPS Information:
Minimum amount required--Determined at auction
Corpus CUSIP number--912XXX XX X
STRIPS Information:
Due dates and CUSIP numbers for additional TINTs: 912XXX.
April 15, 20XX--XX X
October 15, 20XX--XX X
April 15, 20XX--XX X
October 15, 20XX--XX X
April 15, 20XX--XX X
October 15, 20XX--XX X
April 15, 20XX--XX X
October 15, 20XX--XX X
April 15, 20XX--XX X
October 15, 20XX--XX X
April 15, 20XX--XX X
October 15, 20XX--XX X
April 15, 20XX--XX X
October 15, 20XX--XX X
April 15, 20XX--XX X
October 15, 20XX--XX X
April 15, 20XX--XX X
October 15, 20XX--XX X
April 15, 20XX--XX X
October 15, 20XX--XX X
Submission of Bids:
Noncompetitive bids:--Will be accepted in full up to $5,000,000 at
the highest accepted yield.
Competitive bids:
(1) Must be expressed as a real yield with three decimals, e.g.,
3.120%.
(2) Net long position for each bidder must be reported when the sum
of the total bid amount, at all yields, and the net long position is
$______ billion or greater.
(3) Net long position must be determined as of one half-hour prior
to the closing time for receipt of competitive tenders.
Maximum Recognized Bid at a Single Yield--35% of public
offering.
Maximum Award--35% of public offering.
Receipt of Tenders:
Noncompetitive tenders: Prior to 12:00 noon Eastern Daylight Saving
time on auction day.
Competitive tenders: Prior to 1:00 p.m. Eastern Daylight Saving time
on auction day.
Payment Terms: Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date.
Indexing Information:
CPI Base Reference Period:--19XX-XX
Ref CPI 10/15/20XX:--XXX.XXXXX
[FR Doc. 96-33396 Filed 12-31-96; 10:08 am]
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