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: Proposed Rule.

SUMMARY: The Department of the Treasury ("Treasury" or
"Department") is proposing for comment 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
proposed amendment includes changes necessary to make fungible
stripped interest components for Treasury inflation-indexed
securities, which the Department began issuing in January 1997. 
In addition, the proposed amendment makes certain technical
clarifications and conforming changes.

DATES: Comments must be received on or before February 6, 1998.

ADDRESSES: Written comments should be sent to:  Government 
Securities Regulations Staff, Bureau of the Public Debt, 
999 E Street N.W., Room 515, Washington, D.C. 20239-0001.  
Comments may also be sent via the Internet to the Government 
Securities Regulations Staff at govsecreg@bpd.treas.gov.  
When sending comments via the Internet, please use an 
ASCII file format and provide your full name and mailing address.  
Comments received will be available for public inspection and 
downloading from the Internet and for public inspection and 
copying at the Treasury Department Library, Room 5030, Main 
Treasury Building, 1500 Pennsylvania Avenue, N.W.,
Washington, D.C. 20220.

	This proposed amendment has also been made available
for downloading from Public Debt's web site at the following
address: www.publicdebt.treas.gov.  

FOR FURTHER INFORMATION CONTACT: Ken Papaj (Director), Chuck
Andreatta or Kurt Eidemiller (Government Securities Specialists),
Department of the Treasury, 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/

       In January 1997, the Department began issuing a new type of
marketable security, referred to as a Treasury inflation-indexed
security,/2/ whose principal value is adjusted for inflation as
measured by the United States Government./3/  The Department
believes the issuance of these new securities will reduce
interest costs to the Treasury over the long term and broaden the
types of debt instruments available to investors in U.S.
financial markets.

       A.  Inflation-Indexed STRIPS.

       Inflation-indexed securities are eligible for the STRIPS
(Separate Trading of Registered Interest and Principal of
Securities) program immediately upon their issuance by the
Treasury.  STRIPS is the Department's program under which
eligible securities are authorized to be separated into principal
and interest components (interest components are also referred to
as "TINTS").  Such components are maintained in book-entry
accounts, and transferred separately in the Treasury/Reserve
Automated Debt Entry System ("TRADES" or the commercial book-
entry system).  Unlike TINTS from fixed-principal securities,
interest components stripped from an inflation-indexed security
are currently not fungible (i.e., they are not interchangeable)
with interest components stripped from a different inflation-
indexed security, even if the components have the same maturity
(payment) date./4/

       Making such stripped interest components fungible (i.e.,
interchangeable and having the same CUSIP number) is a more
complicated process than it is for fixed-principal interest
components because of the way in which inflation-indexed
securities adjust for inflation.  Interest payments and the
inflation-adjusted principal amount paid at maturity are
calculated based on the amount of inflation, as measured by
changes in the CPI,/5/ that has occurred since the original issue
date of the security.

       Although the CPI is announced monthly, a unique "reference
CPI" can be calculated for any particular date using an
interpolative process described in Appendix B of the uniform
offering circular./6/  Each inflation-indexed security has a
unique reference CPI value applicable to the security's original
issue date./7/  This is the starting point for measuring
inflation for the period the security is outstanding.  To
calculate interest payments or the principal value at maturity of
an inflation-indexed security, the par amount is adjusted for
inflation by application of an "index ratio," which is the ratio
of the reference CPI applicable to the interest payment or
maturity date divided by the reference CPI applicable to the
original issue date.  Stripped principal and interest components
with the same maturity date that are created from securities with
different issue dates have different index ratios at maturity. 
This makes providing for fungibility of the interest components
somewhat complicated.

       Due to this complexity, inflation-indexed interest
components were not made fungible when the securities were first
offered in January 1997.  As a result, while the rules currently
permit inflation-indexed securities to be stripped into separate
principal and interest components, interest components from the
outstanding 5-year and 10-year inflation-indexed notes are not
fungible even though some components would have the same maturity
(payment) date.  In the preamble to the final rule amendments to
accommodate inflation-indexed securities, the Department stated
that it would "continue to work on making interest components
fungible in a manner that is operationally feasible."/8/  The
Department recognizes that making stripped inflation-indexed
interest components fungible is important to developing a liquid
market for these components.

       Over the last several months, the Department has worked with
market participants to develop a methodology that will enable
interest components stripped from different inflation-indexed
securities to be fungible.  The Department requests comments from
market participants on the following proposed methodology and any
related aspects of this proposal.  Specifically, comments are
requested on any operational issues, including the time needed to
make any necessary automated system changes, and the extent to
which making inflation-indexed TINTS fungible would help in the
continued development of a liquid market for inflation-indexed
securities.

       B.  Proposed Methodology for Fungible Inflation-Indexed
STRIPS.

       To make TINTS from different inflation-indexed securities
fungible, the TINTS would be converted to a common reference CPI
value of 100.  This would be accomplished by calculating an
"adjusted value" (see sections 356.2 and 356.31(c) of the
proposed rule).  The adjusted value of each TINT would be
calculated by multiplying the par amount of the inflation-indexed
security to be stripped by the security's semiannual interest
rate, and then multiplying this amount by the ratio of 100
divided by the reference CPI for the security's original issue
date.  For example, an inflation-indexed security with a par
amount of $1 million, an interest rate of 3-1/2%, and an issue-
date reference CPI of 162.00000 would have an adjustment factor
for each TINT of $1 million x (0.035)/2 x (100/162), or
$10,802.47.  Inflation-indexed TINTS would be maintained in
accounts and transferred at their "adjusted value."  This is in
contrast to stripped principal components, which would be
maintained and transferred at their par amount.

       All inflation-indexed TINTS with the same maturity date
would have the same CUSIP number, regardless of the underlying
inflation-indexed security from which the interest components
were stripped.  Such TINTS would be considered to be the same
security and would therefore be fungible.  Fungibility would
apply to TINTS only; stripped principal components would not be
fungible.  TINTS from inflation-indexed securities would not be
fungible with any interest components stripped from fixed-
principal securities.

       By converting to adjusted values, all inflation-indexed
TINTS having the same maturity date would become fungible.  They
would be bought and sold on the basis of their adjusted values,
regardless of the underlying security from which they were
stripped.  Similarly, for purposes of reconstituting an
inflation-indexed security from its separate stripped unmatured
interest and principal components, an investor could obtain any
needed TINTS at the adjusted value required for the particular
inflation-indexed security to be reconstituted.  For example, to
reconstitute $1 million of an inflation-indexed security with an
interest rate of 3-1/2% and an issue-date reference CPI of
162.00000, a holder would submit to the Federal Reserve Bank of
New York the principal component and all unmatured TINTS, each
TINT having an adjusted value of $1 million x (0.035)/2 x
(100/162), or $10,802.47.

       When a TINT matures, its payment amount would be calculated
by multiplying the adjusted value by the reference CPI for the
maturity date, divided by 100.  For example, for an adjusted
value of $10,802.47 and a maturity-date reference CPI of
167.00000, the payment amount would be $10,802.47 x (167/100), or
$18,040.12.  The end result is that a holder of an inflation-
indexed TINT stripped from a security of a given par amount would
receive, except for a possible slight difference due to rounding
procedures, a payment amount at maturity that is the same as the
interest payment received by a holder of a fully-constituted
security of the same par amount./9/

       C.  Payment Differences.

       The possible difference in payment amount between a stripped
interest component and an interest payment from a fully-
constituted security results primarily from rounding the index
ratio.  The size of the differences is a function of both the
interest rate of the fully-constituted security and the level of
the CPI on the payment date.  These differences are quite small. 
For example, for an inflation-indexed security with an interest
(coupon) rate of 4% or less/10/ and a reference CPI of 200 or
less on the payment date, the maximum payment difference per $1
million of par is $0.11 (higher or lower).  Over a range of
securities offerings, these payment differences generally would
be revenue neutral -- they would benefit neither the Treasury nor
STRIPS investors.  Further, revising Treasury's rounding
conventions would require market participants and the Department
to modify their automated systems to accommodate this change. 
Since the payment differences are de minimis and revenue neutral,
the costs of such systems changes would outweigh their benefits. 
Therefore, the Department has determined not to change its
current rounding conventions to eliminate these differences.

       D.  Minimum and Multiple Amounts for Stripping.

       In order to make the calculation of adjusted values and
payment amounts for inflation-indexed TINTS as precise as
possible, adjusted values would be calculated -- and transferred
and maintained -- to the penny (e.g., $10,802.47).  Therefore, in
effect there would be no required multiple amounts for inflation-
indexed TINTS.  This is in contrast to fixed-principal TINTS,
which must be transferred and maintained in multiple amounts of
$1,000.  Some market participants that plan to participate in the
inflation-indexed STRIPS market might need to modify their
automated systems to accommodate holding Treasury securities to
the penny (i.e., to two decimal places).

       The minimum par amount of a fully-constituted inflation-
indexed security that could be submitted to the Federal Reserve
Bank of New York for stripping would be $1,000, with any larger
amounts in multiples of $1,000.  Except for the requirement that
they be expressed to the penny, there would be no required
minimum adjusted value for the resulting TINTS.  This is in
contrast to minimum and multiple stripping requirements for
fixed-principal securities, under which, for any given interest
rate, the fully-constituted security must be submitted in a
specific minimum and multiple par amount in order to produce
TINTS that are themselves in minimum and multiple amounts of
$1,000./11/

       No changes are being proposed at this time to the current
STRIPS program for fixed-principal securities.  However, the
Department will consider at a later date the desirability of
making changes to the minimum and multiple requirements for
fixed-principal TINTS similar to the proposed requirements for
inflation-indexed TINTS, i.e., discontinuing the $1,000 minimum-
to-hold and multiple requirement, and permitting fixed-principal
TINTS to be held in amounts to the penny.

       E.  Index Contingencies.

       The CPI is expressed in relative terms in relation to a
particular time base reference period for which the level is set
at 100.  The current CPI reference period is 1982-84.  The
Department understands that, sometime during the next two years,
the Bureau of Labor Statistics (BLS) plans to rebase the CPI to a
1993-95 base period.  Once this new base period goes into effect,
subsequent issuances of Treasury inflation-indexed securities
would be issued using the new base period.  In other words, the
reference CPI of the original issue date will reflect the new
reference period and thus will generally be a lower number than
the issue-date reference CPIs of those inflation-indexed
securities issued prior to the effective date of the new base
reference period.

       When this new reference period goes into effect, Treasury
understands that BLS will continue to publish CPI figures for the
1982-84 base period as well as publish figures for the new 1993-
95 base period.  Interest payments, and principal payments at
maturity, for unstripped inflation-indexed securities issued
while the 1982-84 base period was in effect will continue to be
calculated using reference CPI numbers derived from this base
period.

       Allowing inflation-indexed TINTS issued during one base
reference period to be fungible with those issued during other
base reference periods could enhance their liquidity. 
Fungibility could be achieved through, for example, the use of a
conversion factor that would, in effect, transform the adjusted
values of all inflation-indexed TINTS with 1982-84 base-period
reference CPIs to values based on the 1993-95 base period. 
However, such a process would likely result in additional payment
differences of a similar nature and magnitude as those described
previously.  As was the case with those payment differences,
payment differences caused by the transformation of adjusted
values to a new base period would generally be revenue neutral
over a range of securities offerings.  Since, for each rebasing,
there would be a one-time conversion for those outstanding
inflation-indexed securities, Treasury would provide this
conversion factor to market participants so that they could
modify their systems accordingly.  The CPI has been rebased
approximately every 10 years so, during the maturity period of a
30-year inflation-indexed bond, rebasing could occur two or three
times.  The Department solicits comment from market participants
on whether the benefits of increased supply, and thus additional
liquidity, of specific fungible inflation-indexed TINTS would
justify the cost and inconvenience of having additional small
payment discrepancies, possible automated system changes to
accommodate a conversion factor, and increased complexity of the
rules.

       A different index contingency would occur if the Treasury
were to replace the CPI with a different measure of inflation for
the purpose of indexing securities because the CPI was
discontinued or "fundamentally" altered as described in the
preamble to the final rule amendment to accommodate inflation-
indexed securities./12/  The Department is not aware of any plans
to discontinue or fundamentally change the CPI, but it is
important for market participants to understand the effect that
such an event would have on outstanding inflation-indexed
securities.  The Department has determined that TINTS stripped
from inflation-indexed securities issued under different indices
would not be fungible.

       F.  Fungibility of TINTS Created Prior to Effective Date of
Amendment.

       As of October 31, 1997, none of the currently outstanding
inflation-indexed securities has been stripped.  If these
securities were to be stripped prior to the effective date of a
final rule making inflation-indexed TINTS fungible, the resulting
TINTS would be converted to fungible TINTS since it is the
Department's goal, where possible, to make all TINTS from
inflation-indexed securities fungible.  Specifically, if a market
participant decides to strip an inflation-indexed security prior
to the effective date for making STRIPS fungible, Treasury will
convert any outstanding inflation-indexed TINTS by retiring them
and issuing new fungible inflation-indexed TINTS.  If necessary,
Treasury will provide public notice informing participants of the
effective conversion date.  Also, detailed instructions regarding
the conversion to fungible STRIPS will be provided.

       G.  Taxation.

       There are no new tax issues related to making inflation-
indexed TINTS fungible.  The tax treatment as noted in current 31
CFR 356.32 applies.

II.  Section-by-Section Analysis

       This proposed amendment, when finalized, would include the
necessary revisions to make fungible the stripped interest
components of marketable Treasury inflation-indexed securities. 
This rule would amend sections 356.2 and 356.31 and add a new
section IV to Appendix B of the uniform offering circular.

       A.  Section 356.2 - Definitions

       The term "adjusted value" has been added to the listing of
definitions in  356.2.  This term refers specifically to
interest components stripped from inflation-indexed securities.

       B.  Section 356.31 - STRIPS

       Changes have been made to  356.31 to reflect the STRIPS
program more completely.  The section has been reorganized to
distinguish more clearly the features of fixed-principal STRIPS
from inflation-indexed STRIPS.  Most of the significant
modifications to this section have been made in paragraph (c),
which only discusses inflation-indexed securities.

       Specifically, new paragraph (c)(1) provides that the minimum
and multiple par amount of an inflation-indexed security that may
be stripped would be $1,000.  New paragraph (c)(2), except for a
revised title, is essentially the same as current paragraph (e),
since the treatment of principal components stripped from
inflation-indexed securities does not change under this proposal. 
New paragraph (c)(3) describes the calculation of the adjusted
value for interest components; clarifies that interest components
stripped from inflation-indexed securities would be maintained
and transferred at their adjusted value; describes the
fungibility of these components; and explains how the payment
amount would be calculated from the adjusted value.  New
paragraph (d), which discusses reconstitution, is essentially the
same as current paragraph (g) except that the sentence stating
that interest components stripped from inflation-indexed
securities are not interchangeable has been deleted.  New
paragraph (e) is the same as current paragraph (h).

       C.  Appendix B to Part 356

       A new Section IV has been added to Appendix B to provide the
formulas and an example for calculating the adjusted value and
the payment amount for inflation-indexed TINTS.  The previous
Section IV has been renumbered as Section V.

       D.  Exhibit C to Part 356

       The title of Exhibit C has been revised to indicate that the
exhibit, which contains minimum par amounts of securities for
stripping at various interest rates, applies only to fixed-
principal STRIPS.

III.   Procedural Requirements

       This proposed rule does not meet the criteria for a
"significant regulatory action" pursuant to Executive Order
12866.  Although this rule is being issued in proposed form to
secure the benefit of public comment, 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
proposed rule and, therefore, the Paperwork Reduction Act does
not apply.  The collections of information in 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:  12/01/97
Gerald Murphy
Fiscal Assistant Secretary

       For the reasons set forth in the preamble, 31 CFR Chapter
II, Subchapter B, Part 356, is proposed to be 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 "Adjusted value" to read as follows:

 356.2  Definitions.

*****

       Adjusted value means, for an interest component stripped
from an inflation-indexed security, an amount derived by
multiplying the semiannual interest rate by the par amount and
then multiplying this value by 100 divided by the Reference CPI
of the original issue date (or dated date, when the dated date is
different from the original issue date).  (See Appendix B,
Section IV to this part, for an example of how to calculate the 
adjusted value for interest components stripped from an 
inflation-indexed security.)

*****

       3.  Section 356.31 is revised to read as follows:

 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)  Treasury fixed-principal securities.

       (1)  Minimum par amounts required for STRIPS.  For a fixed-
principal security to be stripped into the components described
above, the par amount of the security must be in an amount that,
based on its interest rate, will produce a semiannual interest
payment in a multiple of $1,000.  Exhibit C to this part provides
the minimum par amounts required to strip a fixed-principal
security at various interest rates, as well as the corresponding
interest payments.  Amounts greater than the minimum par amount
must be in multiples of that amount.  The minimum par amount
required to strip a particular security will be provided in the
press release announcing the auction results.

       (2)  Principal components.  Principal components stripped
from fixed-principal securities are maintained in accounts, and
transferred, at their par amount.  The principal components have
a CUSIP number that is different from the CUSIP number of the
fully-constituted (unstripped) security.

       (3)  Interest components.  Interest components stripped from
fixed-principal securities are maintained in accounts, and
transferred, 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.

       (c)  Treasury inflation-indexed securities.

       (1)  Minimum par amounts required for STRIPS.  The minimum
par amount of an inflation-indexed security that may be stripped
into the components described in paragraph (a) of this section is
$1,000.  Any par amount to be stripped above $1,000 must be in a
multiple of $1,000.

       (2)  Principal components.  Principal components stripped
from inflation-indexed securities are maintained in accounts, and
transferred, at their par amount.  At maturity, the holder will
receive the inflation-adjusted principal value or the par amount,
whichever is greater.  (See  356.30.)  The principal components
have a CUSIP number that is different from the CUSIP number of
the fully-constituted (unstripped) security.

       (3)  Interest components.  Interest components stripped from
inflation-indexed securities are maintained in accounts, and
transferred, at their adjusted value, which is derived by
multiplying the semiannual interest rate by the par amount and
then multiplying this value by 100 divided by the Reference CPI
of the original issue date (or dated date, when the dated date is
different from the original issue date).  See Appendix B, Section
IV to this part, for an example of how to calculate an adjusted 
value.  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.  At 
maturity, the payment to the holder will be derived by 
multiplying the adjusted value of the interest component by 
the Reference CPI of the maturity date, divided by 100.  
See Appendix B, Section IV to this part, for an example of 
how to calculate an actual payment amount from an adjusted value.

       (d)  Reconstituting a security.  Stripped interest and
principal components may be reconstituted, i.e., restored to
their fully-constituted form.  A principal component and all
related unmatured interest components, in the appropriate minimum
or multiple amounts or adjusted values, must be submitted
together for reconstitution.  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.

       (e)  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 chapter.

       4.  Appendix B to Part 356 is amended by revising the list
of section headings at the beginning of the Appendix to read 
as follows:

            APPENDIX B TO PART 356--FORMULAS AND TABLES

       I.     Computation of Interest on Treasury Bonds and Notes.
       II.    Formulas for Conversion of Fixed-Principal Security
              Yields to Equivalent Prices.
       III.   Formulas for Conversion of Inflation-Indexed Security
              Yields to Equivalent Prices.
       IV.    Computation of Adjusted Values and Payment Amounts for
              Stripped Inflation-Indexed Interest Components.
       V.     Computation of Purchase Price, Discount Rate, and
              Investment Rate (Coupon-Equivalent Yield) for Treasury
              Bills.

*****

       5.  Appendix B to Part 356 is amended by redesignating
Section IV as Section V and adding a new Section IV to read as
follows:

*****
              IV.  COMPUTATION OF ADJUSTED VALUES
                 AND PAYMENT AMOUNTS FOR STRIPPED
               INFLATION-INDEXED INTEREST COMPONENTS

       NOTE:  Valuing an interest component stripped from an
inflation-indexed security at its adjusted value enables this
interest component to be interchangeable (fungible) with other
interest components that have the same maturity date, regardless
of the underlying inflation-indexed security from which the
interest components were stripped.  The adjusted value provides
for fungibility of these various interest components when buying,
selling, or transferring them, or when reconstituting an
inflation-indexed security.

Definitions:
C = the regular annual interest rate, payable semiannually,
    e.g., 3.625% (the decimal equivalent of a 3-5/8% interest
    rate)
Par = par amount of the security to be stripped
Ref CPIIssue Date = reference CPI for the original issue date (or
                    dated date, when the dated date is different from
                    the original issue date) of the underlying
                    (unstripped) security
Ref CPIDate = reference CPI for the maturity date of the interest
              component
AV = adjusted value of the interest component
PA = payment amount at maturity by Treasury

Formulas:
AV = Par (C/2)(100/Ref CPIIssue Date)
     (rounded to 2 decimals with no intermediate rounding)
PA = AV (Ref CPIDate/100)
     (rounded to 2 decimals with no intermediate rounding)

       Example.  A 10-year inflation-indexed note paying 3-1/2%
interest is issued on January 15, 1999, with the second interest
payment on January 15, 2000.  The Ref CPI on January 15, 1999
(Ref CPIIssue Date) is 174.62783, and the Ref CPI on January 15, 2000
(Ref CPIDate) is 179.86159.  Calculate the adjusted value and the
payment amount at maturity of the interest component.

Definitions:
C = 3.50%
Par = $1,000,000
Ref CPIIssue Date = 174.62783
Ref CPIDate = 179.86159

Resolution:
       For a par amount of $1 million, the adjusted value of each
stripped interest component is $1,000,000
(.035/2)(100/174.62783), or $10,021.31 (no intermediate
rounding).

       For an interest component maturing on January 15, 2000, the
payment amount is $10,021.31 x (179.86159/100), or $18,024.49 (no
intermediate rounding).

*****

       6.  Exhibit C to Part 356 is amended by revising the heading 
to read as follows:

          Exhibit C to Part 356 -- Minimum Par Amounts for
                       Fixed-Principal STRIPS

*****

Footnotes:

       /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.
       /2/  To date the Department has issued only inflation-
indexed notes.  31 CFR Part 356 also accommodates offerings of
inflation-indexed bonds, which the Department intends to begin
issuing in 1998.
       /3/  62 FR 846 (January 6, 1997).
       /4/  See 31 CFR 356.31(f).
       /5/  CPI refers to 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 U.S.
Department of Labor.
       /6/  See 31 CFR Part 356, Appendix B, Section I, Paragraph
B, for a detailed explanation of the indexing process and
application of the index ratio and reference CPI.
       /7/  If the security's dated date is different from the
original issue date, then the reference CPI for the dated date is
used.  See 31 CFR 356.2 for the definition of dated date.  This
preamble discussion assumes that the original issue date and the
dated date are the same and therefore uses only the term original
issue date. 
       /8/  62 FR 846, 848 (January 6, 1997).
       /9/  In this example, a holder of $1 million of the fully-
constituted security would receive an interest payment of
$18,040.05.
       /10/  To date, the interest (coupon) rates on the two issues
of Treasury inflation-indexed notes have been 3-3/8% and 3-5/8%. 
       /11/  31 CFR 356, Exhibit C includes a table that provides,
for each interest rate from 1/8% to 20%, the corresponding
minimum par amount of the fully-constituted security required to
produce TINTS that are in multiples of $1,000.
       /12/  62 FR 846, 849 (January 6, 1997).

BILLING CODE: 4810-39-W