[Federal Register Volume 63, Number 167 (Friday, August 28, 1998)]
[Rules and Regulations]
[Pages 45945-45947]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23145]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 359


Offering Regulations for United States Savings Bonds, Series I

AGENCY: Bureau of the Public Debt, Fiscal Service, 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 the offering 
circular for United States Series I savings bonds. The amendment is a 
technical change to accommodate the first Series I savings bond 
offering, effective September 1, 1998.

EFFECTIVE DATE: September 1, 1998.

ADDRESSES: Copies of this final rule are available for downloading from 
the Bureau of the Public Debt at the following World Wide Web address: 
<http://www.savingsbonds.gov> or may be obtained from the Bureau of the 
Public Debt, Division of Staff Services, 200 3rd St., Parkersburg, WV 
26106-1328.

FOR FURTHER INFORMATION CONTACT: Wallace L. Earnest, Director, Division 
of Staff Services, at (304) 480-6319 or by e-mail at 
<[email protected]>; Edward C. Gronseth, Deputy Chief Counsel, at 
(304) 480-5192 or by e-mail at <[email protected]>; or Dean A. 
Adams, Assistant Chief Counsel, Office of the Chief Counsel, at (304) 
480-5192 or by e-mail at <[email protected]>.


[[Page 45946]]


SUPPLEMENTARY INFORMATION: 31 CFR Part 359, referred to as the offering 
circular, sets out the terms and conditions for the sale and issuance 
of United States savings bonds, Series I, by the Department of the 
Treasury to the public. The Department is issuing in final form an 
amendment to the offering circular as a technical change to accommodate 
the first Series I savings bond offering, effective September 1, 1998. 
The offering regulations currently provide that the Series I composite 
rate will be set forth in rate announcements published each May and 
November. The composite rate consists of the fixed rate of return and 
the variable semiannual inflation rate for inflation-indexed savings 
bonds. The initial rate announcement, effective September 1, 1998, will 
reflect the Secretary's determination of the fixed rate of return for 
bonds during the two-month period beginning September 1, 1998, through 
October 31, 1998. The variable semiannual inflation rate will reflect 
the rate of change in the CPI-U for the six-month period ending with 
March 31, 1998.

Procedural Requirements

    This final rule does not meet the criteria for a ``significant 
regulatory action'' pursuant to Executive Order 12866. Therefore, the 
regulatory review procedures contained therein do not apply.
    This final rule relates to matters of public contract and 
procedures for U.S. securities. The notice and public procedures 
requirements of the Administrative Procedure Act are inapplicable, 
pursuant to 5 U.S.C. 553 (a)(2).
    Since 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 is no new collection of information contained in this final 
rule, and, therefore, the Paperwork Reduction Act (44 U.S.C. 3507) does 
not apply.

List of Subjects in 31 CFR Part 359

    Bonds, Federal Reserve System, Government securities, Securities.

    Dated: August 24, 1998.
Donald V. Hammond,
Acting Fiscal Assistant Secretary.

    For the reasons set forth in the preamble, 31 CFR Chapter II, 
Subchapter B, is amended as follows:

PART 359--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES I

    1. The authority citation for part 359 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.

    2. In Sec. 359.2, paragraphs (e)(1)(i) through (e)(1)(v) are 
revised to read as follows:


Sec. 359.2  Description of bonds.

* * * * *
    (e) Composite rates and redemption values. (1) The following 
definitions apply for determining the composite rates and redemption 
values:
    (i) Rate announcements. Rates applicable to Series I bonds will be 
furnished in rate announcements published each May 1 and November 1, or 
at any other date determined by the Secretary or the Secretary's 
designee. 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; however, the 
effective date of the rates remains the first day of the month of the 
announcement.
    (ii) Fixed rate of return. Each May and November, or at any other 
date determined by the Secretary or the Secretary's designee, the 
Secretary shall establish the fixed rate of return for Series I bonds 
issue-dated during the six-month period, or any other period determined 
by the Secretary or the Secretary's designee, beginning on such date. 
Such fixed rate of return will be applicable for the life of the bond.
    (iii) Semiannual inflation rate. Each May and November, or at any 
other date determined by the Secretary or the Secretary's designee, 
Treasury will announce a variable semiannual inflation rate for Series 
I bonds. The index used to determine this rate will be the non-
seasonally adjusted U.S. City Average All Items Consumer Price Index 
for All Urban Consumers (``CPI-U'') published by the Bureau of Labor 
Statistics (``BLS'') of the U.S. Department of Labor. The semiannual 
inflation rate to be effective with the May announcement, and the rate 
that is effective for Series I bonds offered from September 1, 1998, 
through October 31, 1998, will reflect the rate of change in the CPI-U 
for the six-month period ending with the immediately preceding March 
31. The rate of change over the six-month period will be expressed as a 
percentage, rounded to the nearest one-hundredth of one percent. More 
specifically, the semiannual inflation rate will reflect the CPI-U 
value for the most recent March less the value for the preceding 
September, that difference will then be divided by the CPI-U value for 
the preceding September, and the result will be multiplied by 100 to 
convert the rate to a percentage. The resulting rate will be rounded to 
the nearest one-hundredth of one percent. The semiannual inflation rate 
to be effective with the November announcement, reflecting the change 
in the CPI-U for the six-month period ending with the immediately 
preceding September, will be similarly determined. In certain 
deflationary conditions, the semiannual inflation rate may be negative 
to such an extent that it will offset the fixed rate of return. 
However, the redemption value of a Series I bond for any particular 
month will not be less than the value for the preceding month. (See 
Sec. 359.3(b) for a discussion of the lag between when inflation is 
measured and when it is reflected in the value of a bond.)
    (iv) Index contingencies. If a previously reported CPI-U is 
revised, Treasury will continue to use the previously reported CPI-U in 
calculating redemption values. If the CPI-U is rebased to a different 
year, Treasury will continue to use the CPI-U based on the base 
reference period in effect when the security was first issued, as long 
as that CPI continues to be published. If, while an inflation-indexed 
savings bond is outstanding, the applicable CPI-U 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, Treasury, after consulting with the Bureau of Labor 
Statistics (``BLS''), or any successor agency, will substitute an 
appropriate alternative index. Treasury will then notify the public of 
the substitute index and how it will be applied. Determinations of the 
Secretary in this regard will be final.
    (v) Composite rate. (A) The fixed rate of return, FR, and the 
semiannual inflation rate, SIR, as determined in paragraphs (e)(1)(ii) 
and (iii) of this section are divided by 100 to remove the percentage 
format (i.e., to convert to decimal form) and are then combined into a 
composite annual rate, CR, in accordance with the following formula:

CR = {SIR + (FR  2) + [SIR  x  (FR  2)]}  x  2

    (B) The resulting annual rate is converted to a percentage and is 
rounded to the nearest one-hundredth of one percent. The composite 
rates will be announced by Treasury each May and November, or at any 
other date determined by the Secretary or the Secretary's designee, and 
will be derived from the semiannual inflation

[[Page 45947]]

rate announced on the same date and the fixed rates of return 
applicable to Series I savings bonds.
* * * * *
    3. In Sec. 359.3, paragraph (b)(1) is revised to read as follows:


Sec. 359.3  Investment considerations.

* * * * *
    (b) Inflation lag. (1) The inflation rate component of investor 
earnings will be determined twice each year. This rate will be the 
percentage change in the CPI-U for the six months ending each March and 
September. The rate will be included in the composite rate that is 
announced each May and November. For Series I bonds offered from 
September 1, 1998, through October 31, 1998, the inflation rate 
component of investor earnings will be the percentage change in the 
CPI-U for the six months ending March 31, 1998. This rate will be 
included in the composite rate that is announced for Series I bonds 
offered effective from September 1, 1998, through October 31, 1998. In 
the event the Secretary, or the Secretary's designee, announces a 
composite rate at an effective date other than May 1 or November 1, the 
announcement will specify the period to be used to calculate the 
semiannual inflation rate. Each composite rate will be effective for 
the entirety of the applicable rate period that begins while the rate 
is in effect. Thus, an inflation rate may affect interest accruals from 
3 to 13 months from the date that the CPI-U is measured.
* * * * *
[FR Doc. 98-23145 Filed 8-25-98; 4:00 pm]
BILLING CODE 4810-39-P