[Federal Register Volume 64, Number 15 (Monday, January 25, 1999)]
[Rules and Regulations]
[Pages 3632-3637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1441]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 356

[Department of the Treasury Circular, Public Debt Series No. 1-93]


Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, 
and Bonds

AGENCY: Bureau of the Public Debt, Fiscal Service, Department of the 
Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Department of the Treasury (``Treasury'' or 
``Department'') is issuing 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 
incorporates certain changes in the Department's marketable securities 
auction program that have been made over the last several months. The 
amendment defines the term ``bid-to-cover ratio'' and adds the term to 
the listing of information that the Department provides in its official 
auction results announcements. The amendment also updates an example of 
the proration of auction awards and the sample offering announcements 
to reflect the change in minimum bid amounts to $1,000 for all 
marketable

[[Page 3633]]

Treasury securities auctions. The amendment replaces the example of a 
3-year note with a 5-year note in the sample highlights of the 
quarterly financing offering announcement. Further, the amendment makes 
various revisions to reflect the expansion of uniform or single-price 
auctions to all marketable Treasury securities. Finally, this amendment 
makes minor, unrelated technical corrections by restating terms in 
several equations in Appendix B.

EFFECTIVE DATE: January 25, 1999.

ADDRESSES: This final rule is available for downloading from the Bureau 
of the Public Debt's Internet site at the following address: 
www.publicdebt.treas.gov. It is also available for public inspection 
and copying at the Treasury Department Library, FOIA Collection, Room 
5030, Main Treasury Building, 1500 Pennsylvania Avenue, N.W., 
Washington, D.C., 20220. Persons wishing to visit the library should 
call (202) 622-0990 for an appointment.

FOR FURTHER INFORMATION CONTACT: Kerry Lanham (Acting Director), Chuck 
Andreatta or Kurt Eidemiller (Senior Financial Advisors), Department of 
the Treasury, Bureau of the Public Debt, Government Securities 
Regulations Staff, (202) 219-3632.

SUPPLEMENTARY INFORMATION: 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 
This final amendment provides for several changes to the uniform 
offering circular. It adds a definition of the term ``bid-to-cover 
ratio'' in Sec. 356.2 and revises Sec. 356.23 by incorporating the term 
in the list of information included in auction results press releases; 
reflects in Sec. 356.21 and Exhibit A the changes to $1,000 minimum bid 
amounts for all marketable Treasury securities auctions; replaces in 
Exhibit A the example of a 3-year note with a 5-year note in the sample 
highlights of the quarterly financing offering announcement; modifies 
the definition of ``noncompetitive bid'' in Sec. 356.2 and revises 
Secs. 356.20 and 356.23 and Exhibit A to reflect the Department's 
expansion of single-price auctions to all marketable Treasury 
securities auctions; and makes several minor, unrelated technical 
corrections in the equations provided in Appendix B.
---------------------------------------------------------------------------

    \1\ The uniform offering circular was published as a final rule 
on January 5, 1993 (58 FR 412). The circular, as amended, is 
codified at 31 CFR Part 356.
---------------------------------------------------------------------------

    After the conclusion of a marketable Treasury security auction, the 
Department makes an official announcement of the auction results 
through a press release. On June 1, 1998, the Department began 
providing the ``bid-to-cover ratio'' in all of its auction results 
press releases. This is the ratio of the total par amount of 
competitive and noncompetitive bids by the public divided by the total 
par amount of the securities awarded to the public. The press and some 
market participants use this figure as an indicator of the bidding 
interest and, therefore, the ``success'' of the auction.
    The number is carried to two decimal places, using normal rounding. 
For example, if the total amount bid by the public 2 is 
$24.985561 billion, and the amount awarded to the public is $10.013049 
billion, the bid-to-cover ratio is 24.985561/10.013049 = 2.495, or 
2.50.
---------------------------------------------------------------------------

    \2\  For the calculation of the bid-to-cover ratio, the amount 
bid by and awarded to the public excludes any bids or awards for 
accounts of foreign and international monetary authorities at 
Federal Reserve Banks or for the account of the Federal Reserve 
Banks.
---------------------------------------------------------------------------

    By providing the bid-to-cover ratio on the press release, the 
Department hopes to speed up the dissemination of auction results 
information to the market. This procedural change, however, should not 
be viewed as an endorsement by the Department of the bid-to-cover ratio 
as an analytical method that is superior to other methods for analyzing 
the results of a marketable Treasury security auction.
    Accordingly, Sec. 356.2 of the uniform offering circular is amended 
by adding the definition of the term ``bid-to-cover ratio.'' In 
addition, Sec. 356.23 is reformatted and revised by adding the bid-to-
cover ratio to the listing of information that the Department provides 
on the auction results press releases.
    This final amendment also revises relevant sections of the uniform 
offering circular to reflect the Department's decision to reduce the 
minimum bid amounts (and minimum to hold amounts) to $1,000 for all 
marketable Treasury securities auctions. All Treasury bills, notes, and 
bonds are now issued and transferred in increments of $1,000. As 
announced at the August 1998 quarterly refunding press conference, this 
reduction in the minimum amounts ``puts Treasury bills and short-term 
notes within the reach of small investors.'' Prior to this, Treasury 
bills had minimum bid amounts of $10,000, and Treasury notes with 
maturities of four years or less required minimum bid amounts of 
$5,000. Notes with longer maturities and 30-year bonds have for a long 
time been available in $1,000 minimum purchase amounts. Accordingly, an 
example describing the Department's proration of certain auction awards 
in Sec. 356.21 and the highlights of the sample offering announcements 
listed in Exhibit A are revised to reflect this change.
    In addition, the highlights of the sample quarterly financing 
offering announcement, in Exhibit A, are updated to reflect the 
Department's decision to issue 5-year notes quarterly, instead of 
monthly, while discontinuing the issuance of 3-year notes as announced 
at the quarterly refunding press conference in May 1998.
    The Department announced at its November 1998 quarterly refunding 
press conference on October 28, 1998 that, effective November 2, 1998 
all future auctions of marketable Treasury securities will use the 
uniform or single-price auction method. Previously, Treasury bills and 
certain Treasury notes and bonds had been auctioned using a multiple-
price auction method. As announced at this quarterly refunding press 
conference, the Department believes ``that using uniform-price auctions 
will promote improved efficiency in the markets, and will reduce the 
costs of financing the Federal debt.'' Accordingly, the existing 
definition of ``noncompetitive bid'' in Sec. 356.2 is revised and 
respective 356.20 and 356.23 and the sample offering announcements, in 
Exhibit A, have been modified to reflect this change. The uniform 
offering circular, however, will continue to define and describe 
multiple-price auctions as it has historically done, although this 
method is not currently used. Finally, this amendment also makes 
several unrelated and minor technical corrections in the equations of 
Appendix B.

Procedural Requirements

    This final rule does not meet the criteria for a ``significant 
regulatory action'' pursuant to Executive Order 12866. Because this 
rule relates to public contracts and procedures for United States 
securities, the notice, public comment, and delayed effective date 
provisions 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 is no new collection of information 
contained in

[[Page 3634]]

this final 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 
Sec. 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: January 12, 1999.
Donald V. Hammond,
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 adding in alphabetical order the 
definition of ``Bid-to-cover ratio'' and by revising the definition of 
``Noncompetitive bid'' to read as follows:


Sec. 356.2  Definitions.

* * * * *
    Bid-to-cover ratio means the total par amount of securities bid for 
by the public divided by the total par amount of securities awarded to 
the public. The bid-to-cover ratio excludes any bids or awards for 
accounts of foreign and international monetary authorities at Federal 
Reserve Banks and for the account of the Federal Reserve Banks.
* * * * *
    Noncompetitive bid means, for a single-price auction, a bid to 
purchase securities at the highest yield or discount rate of awards to 
competitive bidders. For a multiple-price auction, a noncompetitive bid 
means a bid to purchase securities at the weighted average yield or 
discount rate of awards to competitive bidders.
* * * * *
    3. Section 356.20 is amended by revising paragraph (b) to read as 
follows:


Sec. 356.20  Determination of auction awards.

* * * * *
    (b) Determining the interest rate for new note and bond issues. The 
interest rate established as a result of the auction will be set at a 
1/8 of one percent increment. For single-price auctions, the interest 
rate established produces the price closest to, but not above, par when 
evaluated at the yield awarded to successful competitive bidders. For 
multiple-price auctions, the interest rate established produces the 
price closest to, but not above, par when evaluated at the weighted-
average yield of awards to successful competitive bidders.
* * * * *
    4. Section 356.21 is amended by revising the last three sentences 
in paragraph (a) to read as follows:


Sec. 356.21  Proration of awards.

    (a) Awards to submitters. * * * For example, Treasury bills may be 
issued with a minimum to hold of $1,000 and multiples of $1,000. Where 
an $18,000 bid is accepted at the high discount rate, and the percent 
awarded at the high discount rate is 88%, the award to that bidder will 
be $16,000, representing an upward adjustment from $15,840 ($18,000 x 
.88) to an appropriate multiple to hold. If tenders at the highest 
accepted discount rate are prorated at, for example, a rate of 4%, the 
award for a $10,000 bid will be $1,000, instead of $400, in order to 
meet the minimum to hold for a bill issue.
* * * * *
    5. Section 356.23 is revised to read as follows:


Sec. 356.23  Announcing auction results.

    (a) After the conclusion of the auction, the Department will make 
an official announcement of the auction results through a press 
release.
    (b) The press release will include such information as:
    (1) The amounts of bids recognized and accepted;
    (2) The range of accepted yields or discount rates;
    (3) The proration percentage;
    (4) The interest rate for a note or bond;
    (5) A breakdown of the amounts of noncompetitive and competitive 
bids recognized and accepted from the public;
    (6) The amounts recognized and accepted from the Federal Reserve 
Banks for their own account and for foreign and international monetary 
authorities;
    (7) The minimum par amount required to strip a note or bond;
    (8) The bid-to-cover ratio; and
    (9) other information that the Department may decide to include.

Appendix B to Part 356--[Amended]

    6. In Appendix B to Part 356, section II, paragraph F is amended by 
replacing the term vn (v with subscript n) throughout the 
paragraph with the term vn (v with superscript n or, 
alternatively, v to the nth power).
    7. In Appendix B to Part 356, section V, paragraph A is amended by 
revising the first equation under the resolution to read as follows:
* * * * *

V. Computation of Purchase Price, Discount Rate, and Investment Rate 
(Coupon-Equivalent Yield) for Treasury Bills

    A. Conversion of the discount rate to a purchase price for 
Treasury bills of all maturities:
* * * * *
    Resolution:

    P=100 [(1--dr)/360]
* * * * *
    8. Exhibit A to Part 356 is amended by revising Sections I through 
III to read as follows:

Exhibit A to Part 356--Sample Announcements of Treasury Offerings to 
the Public

* * * * *

I. Treasury Quarterly Financing Announcement

For release when authorized at press conference February 5, 20XX
Contact: Office of Financing, 202/XXX-XXXX

Treasury February Quarterly Financing

    The Treasury will auction $16,000 million of 5-year notes, 
$12,000 million of 10-year notes, and $10,000 million of 30-year 
bonds to refund $26,996 million of publicly-held securities maturing 
February 15, 20XX, and to raise about $11,004 million of new cash.
    In addition to the public holdings, Government accounts and 
Federal Reserve Banks, for their own accounts, hold $1,795 million 
of the maturing securities, which may be refunded by issuing 
additional amounts of the new securities.
    The maturing securities held by the public include $1,654 
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.
    All of the auctions being announced today will be conducted in 
the single-price auction format. All competitive and noncompetitive 
awards will be at the highest yield of accepted competitive tenders.
    The 5-year and 10-year notes and the 30-year bond being offered 
today are eligible for the STRIPS program.
    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

[[Page 3635]]

Offering Circular for the Sale and Issue of Marketable Book-Entry 
Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about the notes and bond are given in the attached offering 
highlights.

Attachment

                                 Highlights of Treasury Offerings to the Public
                                       [February 20XX Quarterly Financing]
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Offering Amount...............  $16,000 million.  $12,000 million.  $10,000 million.
Description of Offering:
    Term and type of security.  5-year notes....  10-year notes...  30 year bonds.
    Series....................  U-20XX..........  B-20XX..........  Bonds of February 20XX.
    CUSIP number..............  912827XX X......  912827XX X......  912810XX X.
    Auction date..............  February 11,      February 12,      February 13, 20XX.
                                 20XX.             20XX.
    Issue date................  February 18,      February 18,      February 18, 20XX.
                                 20XX.             20XX.
    Dated date................  February 15,      February 15,      February 15, 20XX.
                                 20XX.             20XX.
    Maturity date.............  February 15,      February 15,      February 15, 20XX.
                                 20XX.             20XX.
    Interest rate.............  Determined based  Determined based  Determined based on the highest accepted
                                 on the highest    on the highest    competitive bid.
                                 accepted          accepted
                                 competitive bid.  competitive bid.
      Yield...................  Determined at     Determined at     Determined at auction.
                                 auction.          auction.
    Interest payment dates....  August 15 and     August 15 and     August 15 and February 15.
                                 February 15.      February 15.
    Minimum bid amount and      $1,000..........  $1,000..........  $1,000.
     multiples.
    Accrued interest payable    Determined at     Determined at     Determined at auction.
     by investor.                auction.          auction.
    Premium or discount.......  Determined at     Determined at     Determined at auction.
                                 auction.          auction.
STRIPS Information:
    Minimum amount required...  Determined at     Determined at     Determined at auction.
                                 auction.          auction.
    Corpus CUSIP number.......  912820XX X......  912820XX X......  912803XX X.
    Due dates and CUSIP         Not applicable..  Not applicable..  February 15, 20XX--912833 XX X.
     numbers for additional
     TINTs.
----------------------------------------------------------------------------------------------------------------


The following rules apply to
 all securities mentioned
 above:
 
Submission of Bids:
    Noncompetitive bids......  Accepted in full up to $5,000,000 at the
                                highest accepted yield.
    Competitive bids.........  (1) Must be expressed as a yield with
                                three decimals in increments of .001%,
                                e.g., 7.123%.
                               (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 $2 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    35% of public offering.
 Single Yield.
Maximum Award................  35% of public offering.
Receipt of Tenders:
    Noncompetitive tenders...  Prior to 12:00 noon Eastern Standard time
                                on auction day.
    Competitive tenders......  Prior to 1:00 p.m. Eastern Standard time
                                on auction day.
Payment Terms................  By charge to a funds account at a Federal
                                Reserve Bank on issue date, or payment
                                of full par amount with tender. Treasury
                                Direct customers can use the Pay Direct
                                feature which authorizes a charge to
                                their account of record at their
                                financial institution on issue date.
------------------------------------------------------------------------

II. Treasury Weekly Bill Announcement

Embargoed Until 2:30 p.m. April 15, 20XX
Contact: Office of Financing, 20/XXX-XXXX

Treasury Offers 13-Week and 26-Week Bills

    The Treasury will auction two series of Treasury bills totaling 
approximately $16,000 million, to refund $13,469 million of publicly 
held securities maturing November 19, 1998 and to raise about $2,531 
million of new cash.
    In addition to the public holdings, Federal Reserve Banks for 
their own accounts hold $7,442 million of the maturing bills, which 
may be refunded at the highest discount rate of accepted competitive 
tenders. Amounts issued to these accounts will be in addition to the 
offering amount.
    The maturing bills held by the public include $1,991 million 
held by Federal Reserve Banks as agents for foreign and 
international monetary authorities, which may be refunded within the 
offering amount at the highest discount rate of accepted competitive 
tenders. Additional amounts may be issued for such accounts if the 
aggregate amount of new bids exceeds the aggregate amount of 
maturing bills.
    The 13- and 26-week bill auctions will be conducted in the 
single-price auction format.
    Tenders for the bills 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 for the Sale 
and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds 
(31 CFR Part 356, as amended).
    Details about each of the new securities are given in the 
attached offering highlights.

Attachment

                      Highlights of Treasury Offerings of Bills To be Issued April 24, 20XX
----------------------------------------------------------------------------------------------------------------
 
Offering Amount..................  $8,000 million...............................  $8,000 million.
Description of Offering:
    Term and type of security....  91-day bill..................................  182-day bill.
    CUSIP number.................  912795 XX X..................................  912795 XX X.

[[Page 3636]]

 
    Auction date.................  April 21, 20XX...............................  April 21, 20XX.
    Issue date...................  April 24, 20XX...............................  April 24, 20XX.
    Maturity date................  July 24, 20XX................................  October 23, 20XX.
    Original issue date..........  July 25, 20XX................................  April 24, 20XX.
    Currently outstanding........  $31,725 million..............................  ..............................
    Minimum bid amount and         $1,000.......................................  $1,000
     multiples.
----------------------------------------------------------------------------------------------------------------


 
 
The following rules apply to all securities mentioned
 above:
 
Submission of Bids:
    Noncompetitive bids................................  Accepted in full up to $1,000,000 at the highest
                                                          discount rate of accepted competitive bids.
    Competitive bids...................................  (1) Must be expressed as a discount rate with three
                                                          decimals in increments of .005%, e.g., 7.100%, 7.105%.
                                                          (2) Net long position for each bidder must be reported
                                                          when the sum of the total bid amount, at all discount
                                                          rates, and the net long position is $1 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..........................................  By charge to a funds account at a Federal Reserve Bank
                                                          on issue date, or payment of full par amount with
                                                          tender. Treasury Direct customers can use the Pay
                                                          Direct feature which authorizes a charge to their
                                                          account of record at their financial institution on
                                                          issue date.
----------------------------------------------------------------------------------------------------------------

III. Treasury Cash Management Bill Announcement

Embargoed until 2:30 p.m. February 25, 20XX
Contact: Office of Financing 202/XXX-XXXX

Treasury to Auction Cash Management Bills

    The Treasury will auction approximately $23,000 million of 45-
day Treasury cash management bills to be issued March 3, 20XX.
    Competitive and noncompetitive tenders will be received at all 
Federal Reserve Banks and Branches. Tenders will not be accepted for 
bills to be maintained on the book-entry records of the Department 
of the Treasury (Treasury Direct). Tenders will not be received at 
the Bureau of the Public Debt, Washington, D.C.
    Additional amounts of the bills may be issued to Federal Reserve 
Banks as agents for foreign and international monetary authorities 
at the highest discount rate of accepted competitive tenders.
    The 45-day cash management bill will be conducted in the single-
price auction format. All competitive and noncompetitive awards will 
be at the highest discount rate of accepted competitive tenders.
    This offering of Treasury securities is governed by the terms 
and conditions set forth in the Uniform Offering Circular for the 
Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and 
Bonds (31 CFR Part 356, as amended).

    Note: Competitive bids in cash management bill auctions must be 
expressed as a discount rate with two decimals, e.g., 7.10%.

    Details about the new security are given in the attached 
offering highlights.

Attachment

     Highlights of Treasury Offering of 45-Day Cash Management Bill
------------------------------------------------------------------------
 
Offering Amount..............  $23,000 million.
Description of Offering:
    Term and type of security  45-day Cash Management Bill.
    CUSIP number.............  912795 XX X.
    Auction date.............  February 27, 20XX.
    Issue date...............  March 3, 20XX.
    Maturity date............  April 17, 20XX.
    Original issue date......  October 17, 20XX.
    Currently outstanding....  $24,724 million.
    Minimum bid amount and     $1,000.
     multiples.
Submission of Bids:
    Noncompetitive bids......  Accepted in full up to $1,000,000 at the
                                highest accepted discount rate.
    Competitive bids.........  (1) Must be expressed as a discount rate
                                with two decimals in increments of .01%,
                                e.g., 7.12%.
                               (2) Net long position for each bidder
                                must be reported when the sum of the
                                total bid amount, at all discount rates,
                                and the net long position is $1 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    35% of public offering.
 Single Yield.
Maximum Award................  35% of public offering.

[[Page 3637]]

 
Receipt of Tenders:
    Noncompetitive tenders...  Prior to 11:00 a.m. Eastern Standard time
                                on auction day.
    Competitive tenders......  Prior to 11:30 a.m. Eastern Standard time
                                on auction day.
Payment Terms................  By charge to a funds account at a Federal
                                Reserve Bank on issue date, or payment
                                of full par amount with tender.
------------------------------------------------------------------------

* * * * *
[FR Doc. 99-1441 Filed 1-22-99; 8:45 am]
BILLING CODE 4810-39-P