15430 Federal Register / Vol. 60, No. 56 / Thursday, March 23, 1994 / Rules and Regulations

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 351

[Department of the Treasury Circular, Public

Debt Series No. 1–80]

Offering of United States Savings

Bonds, Series EE

AGENCY: Bureau of the Public Debt,

Fiscal Service, Department of the

Treasury.

ACTION: Final rule.

SUMMARY: This Final Rule amends the

offering circular for Series EE United

States Savings Bonds to reflect rate

changes for Series EE savings bonds

issued on or after May 1, 1995, and the

repeal of the statutory minimum 4

percent investment yield guarantee. The

purpose of these changes is to provide

for greater flexibility in determining and

calculating the interest rates and

redemption values for Series EE savings

bonds.

EFFECTIVE DATE: May 1, 1995.

FOR FURTHER INFORMATION CONTACT:

Wallace Earnest, Director, Division of

Staff Services, Savings Bond Operations,

Bureau of the Public Debt, Parkersburg,

West Virginia 26106–1328 (304) 480–

6319, or Edward Gronseth, Deputy Chief

Counsel, or Bob Riffle, Paralegal

Specialist, Office of the Chief Counsel,

Bureau of the Public Debt (304) 480–

5192.

SUPPLEMENTARY INFORMATION:

I. Background

On March 15, 1976, the savings bonds

statute, the Second Liberty Bond Act (31

U.S.C. 757c(b), later codified at 31

U.S.C. 3105), was amended to require

that the investment yield on Series E

savings bonds would not be less than 4

percent per annum, compounded

semiannually, from the first day of the

month after issue date to the last day of

the month before the redemption date

(31 U.S.C. 3105(b)(2)). The purpose of

this amendment was to provide savings

bond owners with a guaranteed

minimum rate of return no matter when

they redeemed their bonds. In 1982, the

Treasury amended the offering circular

for Series EE bonds held at least 5 years.

The returns were linked to yields for 5-

year Treasury securities. A guaranteed

minimum rate was still in effect, but it

declined over the years from 7.5 percent

to 6 percent to the statutory 4 percent

floor.

On December 8, 1994, the guaranteed

minimum 4 percent was repealed (Pub.l.

103–465). This statutory change

provided the opportunity for Treasury

to consider a fresh approach to

determining rates for new savings bonds

and better achieve the goals of the

Savings Bond Program.

II. Summary of Amendments

Section 351.0 is amended to change

the effective date of the offering circular

to May 1, 1995.

Paragraphs (e) through (i) of section

351.2, are amended to ensure that the

provisions of those paragraphs do not

conflict with or contradict other changes

to Section 351.2, as described below.

A new paragraph (j) is added to

Section 351.2 to describe changes in the

terms and conditions for Series EE

bonds offered for sale on and after May

1, 1995. The following paragraphs

describe the terms and conditions for

such bonds:

Market Yields. Treasury uses market

bid yields for bills, notes, and bonds to

create a yield curve based on the most

actively traded Treasury securities. This

curve relates the yield on a security to

its time to maturity. Yields at particular

points on the curve are referred to as

‘‘constant maturity yields’’ and are

determined by the U.S. Treasury from

this daily yield curve. The Board of

Governors of the Federal Reserve

System currently publishes daily

Treasury constant maturity yields in the

Statistical Release H.15, ‘‘Selected

Interest Rates’’. The 6-month and 5-year

Treasury securities rates described

below are derived from these yield

curves. (Note: This method of

determining market rates has been used

since the inception of the market-based

program in 1982).

Short-Term Savings Bond Rate. No

less frequently than on each May 1 and

November 1, Treasury announces a

short-term savings bond rate. To

determine this rate, Treasury compiles

6-month Treasury securities rates as of

the close of business for each day of the

previous three months and calculates

the monthly average for each month,

rounding each monthly average to the

nearest one-hundredth of one percent.

The short-term savings bond rate is then

determined by taking 85 percent of the

3-month average and rounding the

result to the nearest one-hundredth of

one percent. If the regularly scheduled

date for the announcement (for example,

May 1) is a day when the Treasury is not

open for business, then the

announcement is made on the next

business day and is effective as of the

first day of that month. For bonds

entitled to interest accruals at the shortterm savings bond rate, that rate applies

to the bond’s first full semiannual

interest accrual period following each

announcement of the rate.

Long-Term Savings Bond Rate. No

less frequently than on each May 1 and

November 1, Treasury announces a long

term-savings bond rate. To determine

this rate, Treasury compiles 5-year

Treasury securities rates as of the close

of business for each day of the previous

six months and calculates the monthly

average for each month, rounding each

monthly average to the nearest onehundredth of one percent. The longterm savings bond rate is then

determined by taking 85 percent of the

6-month average and rounding the

result to the nearest one-hundredth of

one percent. If the regularly scheduled

date for the announcement (for example,

May 1) is a day when the Treasury is not

open for business, then the

announcement is made on the next

business day and is effective as of the

first day of that month. For bonds

entitled to interest accruals at the longterm savings bond rate, that rate applies

to the bond’s first full semiannual

interest accrual period following each

announcement of the rate.

Base Denomination. All redemption

value calculations are performed on a

hypothetical denomination of $25,

having a value at the beginning of the

first earning period equal to an issue

price of $12.50. Redemption values for

bonds of greater denominations are in

direct proportion according to the ratio

of denominations. For example, if the

value of a hypothetical $25

denomination is $26.80—i.e., $12.50

issue price plus $14.30 accrued

interest—the value of a $50 bond is

$26.80 × (50 ÷ 25), or $53.60.

Semiannual Earning Periods and

Accrual Dates. Bonds bearing May 1,

1995, and later issue dates, earn interest

during each successive 6-month period

from date of issue to final maturity.

Interest accrues, immediately following

each earning period, on each

semiannual anniversary of the date of

issue, including the date of final

maturity.

Original Maturity. Original maturity

occurs at 17 years after date of issue.

The redemption value of a bond at

original maturity shall not be less than

the face amount (denomination) of the

bond.

Final Maturity. Final maturity occurs

at 30 years after the date of issue. Bonds

cease to earn interest at final maturity.

Interest Rate and Redemption Values

for Bonds Through Original Maturity.

Short-term saving bond rates are used to

determine the increase in redemption

values for each semiannual accrual date

occurring on or before 5 years from the

date of issue. For a bond outstanding
Federal Register / Vol. 60, No. 56 / Thursday, March 23, 1994 / Rules and Regulations 15431

more than five years through original

maturity, long-term savings bond rates

are used to determine the increase in

redemption values for each semiannual

accrual date occurring after 5 years from

the date of issue.

Interest Rate and Redemption Values

for Bonds During An Extended Maturity

Period. From 17 years after date of issue

to the final maturity date, the bond

continues to earn interest and ceases to

earn interest at final maturity.

Outstanding Savings Bonds. No

changes are made to the terms and

conditions for outstanding bonds or to

the regulations governing the offering of

Series E, H and HH savings bonds in 31

CFR parts 316, 332, and 352,

respectively, and savings notes in 31

CFR part 342, as a result of the repeal

of paragraph (b)(2) of 31 U.S.C. 3105

and the amendment to 31 CFR part 351.

Procedural Requirements

It has been determined that this Final

Rule is not a significant regulatory

action as defined in Executive Order

12866. Therefore, an assessment of

anticipated benefits, costs and

regulatory alternatives is not required.

This rule relates to matters of public

contract, as well as the borrowing power

and fiscal authority of the United States.

The notice and public procedures

requirements of the Administrative

Procedure Act are inapplicable,

pursuant to 5 U.S.C. 553(a)(2). As no

notice of proposed rulemaking is

required, the provisions of the

Regulatory Flexibility Act (5 U.S.C. 601,

et seq.) do not apply.

There are no collections of

information required by this Final Rule,

and, therefore, no approval pursuant to

the Paperwork Reduction Act, is

required.

List of Subjects in 31 CFR Part 351

Bonds, Government Securities.

Dated: March 10, 1995.

Gerald Murphy,

Fiscal Assistant Secretary.

For the reasons set forth in the

preamble, Part 351 of Title 31 of the

Code of Federal Regulations is amended

as follows:

PART 351—OFFERING OF UNITED

STATES SAVINGS BONDS, SERIES EE

1. The authority citation for part 351

is revised to read as follows:

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

U.S.C. 3105.

2. Section 351.0 is amended, in the

second sentence, by removing ‘‘March 1,

1993’’, and adding in its place ‘‘May 1,

1995.’’

3. Section 351.2(c) is amended as

follows:

A. Adding at the end of the heading

‘‘for bonds issued prior to May 1, 1995’’;

B. In the second sentence, after

‘‘Series EE bonds’’, by adding ‘‘issued

prior to May 1, 1995,’’;

C. In the table, in the first column, last

line, by revising ‘‘Mar. 1993, and

thereafter’’ to read ‘‘Mar. 1993–Apr.

1995’’; and

D. In the table, in the second column,

last line, by revising ‘‘Mar. 2011, and

thereafter’’ to read ‘‘Mar. 2011–Apr.

2013’’.

4. Section 351.2(e) is amended as

follows:

A. In the paragraph heading, by

revising the words ‘‘November 1, 1982,

or thereafter’’ to read ‘‘November 1,

1982 through April 1, 1995.’’;

B. The introductory text of paragraph

(e) is revised to read as follows:

* * * * *

(e)* * * The investment yield of a

Series EE bond bearing issue dates of

November 1, 1982, through April 1,

1995, from its issue date to each interest

accrual date occurring less than 5 years

after issue, will be as shown in Tables

1, 2, and 3 in the appendix to this part.

* * * * *

C. Removing ‘‘or thereafter’’ at the end

of the first sentence of paragraph (e)(1)

and adding in its place ‘‘through April

1, 1995’’;

D. In paragraph (e)(2)(iii), in the first

sentence, after the words ‘‘May 1,

1989,’’ by removing ‘‘or thereafter’’ and

adding in its place ‘‘through April 1,

1995’’.

5. Section 351.2(f)(2) is amended by

removing ‘‘November 2, 1982’’ and

adding in its place ‘‘November 1, 1982’’.

6. Section 351.2(g) is amended as

follows:

A. In the paragraph heading, after

‘‘Extended maturity periods,’’ by adding

‘‘for bonds bearing issue dates prior to

May 1, 1995’’;

B. In the first sentence, by removing

‘‘of 12 years or less’’;

C. In the heading of paragraph (g)(2),

after ‘‘Extensions granted,’’ adding ‘‘for

bonds bearing issue dates prior to May

1, 1995’’; and

D. By revising the tables in paragraph

(g)(2) to read as follows:

* * * * *

Issues dates—1st day of: Original terms Original maturity dates-day of: Final maturity dates—

1st day of:

Jan. 1980–Oct. 1980 ........................... 11 years ............................................. Jan. 1991–Oct. 1991 .......................... Jan. 2010–Oct. 2010.

Nov. 1980–Apr. 1981 .......................... 9 years ............................................... Nov. 1989–Apr. 1990 ......................... Nov. 2010–Apr. 2011.

May 1981–Oct. 1982 ........................... 8 years ............................................... May 1989–Oct. 1990 .......................... May 2011–Oct. 2012.

Nov. 1982–Oct. 1986 .......................... 10 years ............................................. Nov. 1992–Oct. 1996 ......................... Nov. 2012–Oct. 2016.

Nov. 1986–Feb. 1993 ......................... 12 years ............................................. Nov. 1998–Feb. 2005 ........................ Nov. 2016–Feb. 2023.

Mar. 1993–Apr. 1995 .......................... 18 years ............................................. Mar. 2011–Apr. 2013 ......................... Mar. 2023–Apr. 2025

Issues dates—1st day of: 1st extended maturity dates—

1st day of:*

Years to final maturity Final maturity dates—

1st day of:

Jan. 1980–Oct. 1980 ........................... Jan. 2001–Oct. 2001 .......................... 9 years ............................................... Jan. 2010–Oct. 2010.

Nov. 1980–Apr. 1981 .......................... Nov. 1999–Apr. 2000 ......................... 11 years ............................................. Nov. 2010–Apr. 2011.

May 1981–Oct. 1982 ........................... May 1999–Oct. 2000 .......................... 12 years ............................................. May 2011–Oct. 2012.

Nov. 1982–Oct. 1986 .......................... Nov. 2002–Oct. 2006 ......................... 10 years ............................................. Nov. 2012–Oct. 2016.

Nov. 1986–Feb. 1993 ......................... Nov. 2008–Feb. 2015 ........................ 8 years ............................................... Nov. 2016–Feb. 2023.

Mar. 1993–Apr. 1995 .......................... Mar. 2021–Apr. 2023 ......................... 2 years ............................................... Mar. 2023–Apr. 2025

* At 10 years after original maturity.

* * * * *

E. In the heading of paragraph (g)(3),

by adding ‘‘for bonds bearing issue dates

prior to May 1, 1995’’ after ‘‘extended

maturity period’’.

7. Paragraph 351.2(h) is amended as

follows:

A. In the heading, by adding ‘‘for

bonds issued prior to May 1, 1995’’ after

‘‘Accrual and payment of interest’’;
15432 Federal Register / Vol. 60, No. 56 / Thursday, March 23, 1994 / Rules and Regulations

B. In the fifth sentence, after ‘‘For

bonds with issue dates’’, by removing

‘‘on and after’’ and adding in their place

the word ‘‘of’’; and

C. In the fifth sentence, after ‘‘March

1, 1993,’’, by adding ‘‘through April 1,

1995,’’.

8. Paragraph 351.2(i) is amended as

follows:

A. In the heading, by adding ‘‘for

bonds issued prior to May 1, 1995’’ after

‘‘Tables of redemption values’’; and

B. In the first sentence, after

‘‘November 1, 1982,’’, by removing ‘‘and

thereafter’’, and adding in its place

‘‘through April 1, 1995’’.

9. A new paragraph (j) is added to

Section 351.2 to read as follows:

* * * * *

(j) Market-based interest rate and

redemption values—bonds bearing issue

dates of May 1, 1995, or thereafter. (1)

The following definitions apply for

determining the interest rates and

redemption values for bonds bearing

issue dates of May 1, 1995, and

thereafter:

(i) Market yields. Treasury uses

market bid yields for bills, notes, and

bonds to create a yield curve based on

the most actively traded Treasury

securities. This curve relates the yield

on a security to its time to maturity.

Yields at particular points on the curve

are referred to as ‘‘constant maturity

yields’’ and are determined by the

Treasury from this daily yield curve.

The 6-month and 5-year Treasury

securities rates described below are

derived from these yield curves.

(ii) Short-term savings bond rate. No

less frequently than on each May 1 and

November 1, Treasury announces a

short-term savings bond rate. To

determine this rate, Treasury compiles

6-month Treasury securities rates as of

the close of business for each day of the

previous three months and calculates

the monthly average for each month,

rounding each monthly average to the

nearest one-hundredth of one percent.

The short-term savings bond rate is then

determined by taking 85 percent of the

three-month average and rounding the

result to the nearest one-hundredth of

one percent. If the regularly scheduled

date for the announcement (for example,

May 1) is a day when the Treasury is not

open for business, then the

announcement is made on the next

business day and is effective as of the

first day of that month. For bonds

entitled to interest accruals at the shortterm savings bond rate, that rate applies

to the bond’s first full semiannual

interest accrual period following each

announcement of the rate.

(iii) Long-term savings bond rate. No

less frequently than on each May 1 and

November 1, Treasury announces a

long-term savings bond rate. To

determine this rate, Treasury compiles

5-year Treasury securities rates as of the

close of business for each day of the

previous six months and calculates the

monthly average for each month,

rounding each monthly average to the

nearest one-hundredth of one percent.

The long-term savings bond rate is then

determined by taking 85 percent of the

6-month average and rounding the

result to the nearest one-hundredth of

one percent. If the regularly scheduled

date for the announcement (for example,

May 1) is a day when the Treasury is not

open for business, then the

announcement is made on the next

business day and is effective as of the

first day of that month. For bonds

entitled to interest accruals at the longterm savings bond rate, that rate applies

to the bond’s first full semiannual

interest accrual period following each

announcement of the rate.

(iv) Base denomination. All

redemption value calculations are

performed on a hypothetical

denomination of $25 having a value at

the beginning of the first earning period

equal to an issue price of $12.50.

Redemption values for bonds of greater

denominations are in direct proportion

according to the ratio of denominations.

For example, if the value of a

hypothetical $25 denomination is

$26.80—i.e., $12.50 issue price plus

$14.30 accrued interest—on the same

redemption date, the value of a $50

bond bearing the same issue date is

$26.80 × (50 ÷ 25) or $53.60.

(v) Issue date. The issue date of a

Series EE bond is the first day of the

month in which payment of the issue

price is received by an authorized

issuing agent.

(vi) Semiannual earning periods and

accrual dates. Bonds bearing issue dates

of May 1, 1995, and thereafter earn

interest during each successive six

month period from date of issue to final

maturity. Interest accrues, immediately

following each earning period, on each

semiannual anniversary of the date of

issue, including the date of final

maturity.

(vii) Original maturity. Bonds reach

original maturity at 17 years after date

of issue.

(viii) Final maturity. Bonds reach

final maturity at 30 years after date of

issue. A bond ceases to earn interest at

final maturity.

(2) Interest rates and redemption

values for bonds held 5 years or less.

The interest rate for a Series EE bond

bearing an issue date of May 1, 1995, or

thereafter, for semiannual earning

periods during the first 5 years from

date of issue, is the short-term savings

bond rate determined as defined in

paragraph (j)(1)(ii) of this section.

Redemption values for semiannual

accrual dates occurring on or before 5

years from date of issue are calculated

in accordance with paragraph (j)(5) of

this section.

(3) Interest rates and redemption

values for bonds held 5 years and 6

months and longer. The interest rate for

a Series EE bond bearing an issue date

of May 1, 1995, or thereafter, for

semiannual earning periods beginning 5

years from date of issue through original

maturity, is the long-term savings bond

rate determined as defined in paragraph

(j)(1)(iii) of this section. Redemption

values for semiannual accrual dates

occurring after 5 years from date of

issue, through original maturity, are

calculated in accordance with paragraph

(j)(5) of this section, except that the

redemption value at the date of original

maturity, as provided in paragraph

(j)(1)(vii) of this section, shall not be less

than the denomination (face amount or

face value).

(4) Interest rates and redemption

values for bonds during an extended

maturity period. From 17 years after

date of issue to the final maturity date

(the ‘‘extended maturity period’’) the

bond will be subject to the terms and

conditions in effect when it is issued,

and will continue to earn interest as

described in paragraph (j)(3) of this

section, unless the terms and conditions

applicable to an extended maturity

period are expressly amended prior to

the beginning of such period.

(5) Redemption value calculations.

Interest on a bond accrues and becomes

part of the redemption value which is

paid when the bond is cashed. The

redemption value of a bond on the

accrual date immediately following each

semiannual earning period is

determined as follows:

(i) The applicable long-term or shortterm savings bond rate for the

semiannual earning period is converted

to decimal form by dividing by 100, and

is adjusted to a semiannual rate by

dividing by 2.

(ii) Using redemption values for the

base denomination, as defined in

paragraph (j)(1)(iv) of this section, this

rate is then multiplied by the

redemption value of the bond at the

beginning of the semiannual earning

period.

(iii) The resulting interest amount,

rounded to the nearest cent, is added to

the redemption value of the bond at the

beginning of the earning period to

produce the redemption value at the

next semiannual accrual date. The
Federal Register / Vol. 60, No. 56 / Thursday, March 23, 1994 / Rules and Regulations 15433

redemption value of a bond remains

constant between accrual dates.

(6) The Secretary’s determination.

The determination by the Secretary of

the Treasury, or his delegate, of the

market yields, and the long-term and

short-term savings bond rates, shall be

final and conclusive.

(7) Tables of redemption values.

Tables of redemption value are made

available by the Bureau of the Public

Debt, Parkersburg, West Virginia 26106–

1328, prior to the periods during which

the redemption values are payable.

[FR Doc. 95–7134 Filed 3–21–95; 8:45 am]

BILLING CODE 4810–39–W