Source: http://cfr.regstoday.com/31cfr356.aspx
Timestamp: 2014-07-25 20:34:04
Document Index: 688590420

Matched Legal Cases: ['ART 356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', 'art 356', 'art 356', 'art 356', 'art 356', 'art 356', '§356', '§356', '§356', 'art?\n13', '§356', '§356', 'art 357', 'art 363', '§356', 'art 357', 'art 363', 'art 363', 'art 357', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', '§356', 'art 357', '§356', '§356', '§356', 'art 356', 'art 356', 'art 356', 'art 356', 'art 356', '§356']

31 CFR 356 : SALE AND ISSUE OF MARKETABLE BOOK-ENTRY TREASURY BILLS, NOTES, AND BONDS (DEPARTMENT OF THE TREASURY CIRCULAR, FISCAL SERVICE SERIES NO. 1-93) [ 31 CFR 356 ] : (MONEY AND FINANCE: TREASURY [ 31 CFR ])
PART 356 — SALE AND ISSUE OF MARKETABLE BOOK-ENTRY TREASURY BILLS, NOTES, AND BONDS (DEPARTMENT OF THE TREASURY CIRCULAR, FISCAL SERVICE SERIES NO. 1-93) [ 31 CFR 356 ]
Note: — Current as of: 12/12/2013, Updated weekly.— Enhanced with links to US Code, FR and CFR References where ever possible and more to come.— You can embed the URL to this page in your documents to access the current CFR part. — This consolidated CFR Part was last updated by Federal Register(FR) dated 08/27/2013 for ; .
Table of ContentsSubpart A — General Information [ Last FR update*: 07/28/2004 ] §356.0 — What authority does the Treasury have to sell and issue securities? [ Last FR update*: 07/28/2004 ] §356.1 — To which securities does this circular apply? [ Last FR update*: 07/28/2004 ] §356.2 — What definitions do I need to know to understand this part? [ Last FR update*: 07/31/2013 ] §356.3 — What is the role of the Federal Reserve Banks in this process? [ Last FR update*: 07/28/2004 ] §356.4 — What are the book-entry systems in which auctioned Treasury securities may be issued or maintained? [ Last FR update*: 04/01/2011 ] §356.5 — What types of securities does the Treasury auction? [ Last FR update*: 07/31/2013 ] Subpart B — Bidding, Certifications, and Payment [ Last FR update*: 07/28/2004 ] §356.10 — What is the purpose of an auction announcement? [ Last FR update*: 07/28/2004 ] §356.11 — How are bids submitted in an auction? [ Last FR update*: 09/30/2005 ] §356.12 — What are the different types of bids and do they have specific requirements or restrictions? [ Last FR update*: 07/31/2013 ] §356.13 — When must I report my net long position and how do I calculate it? [ Last FR update*: 07/28/2004 ] §356.14 — What are the requirements for submitting bids for customers? [ Last FR update*: 07/31/2013 ] §356.15 — What rules apply to bids submitted by investment advisers? [ Last FR update*: 07/31/2013 ] §356.16 — Do I have to make any certifications? [ Last FR update*: 03/20/2008 ] §356.17 — How and when do I pay for securities awarded in an auction? [ Last FR update*: 03/20/2008 ] Subpart C — Determination of Auction Awards; Settlement [ Last FR update*: 07/28/2004 ] §356.20 — How does the Treasury determine auction awards? [ Last FR update*: 07/31/2013 ] §356.21 — How are awards at the high yield, discount rate, or discount margin calculated? [ Last FR update*: 07/31/2013 ] §356.22 — Does the Treasury have any limitations on auction awards? [ Last FR update*: 09/30/2005 ] §356.23 — How are the auction results announced? [ Last FR update*: 07/31/2013 ] §356.24 — Will I be notified directly of my awards and, if I am submitting bids for others, do I have to provide confirmations? [ Last FR update*: 09/15/2009 ] §356.25 — How does the settlement process work? [ Last FR update*: 03/20/2008 ] Subpart D — Miscellaneous Provisions [ Last FR update*: 07/28/2004 ] §356.30 — When does the Treasury pay principal and interest on securities? [ Last FR update*: 07/31/2013 ] §356.31 — How does the STRIPS program work? [ Last FR update*: 07/31/2013 ] §356.32 — What tax rules apply? [ Last FR update*: 07/31/2013 ] §356.33 — Does the Treasury have any discretion in the auction process? [ Last FR update*: 07/28/2004 ] §356.34 — What could happen if someone does not fully comply with the auction rules or fails to pay for securities? [ Last FR update*: 07/28/2004 ] §356.35 — Who approved the information collections? [ Last FR update*: 07/28/2004 ] Appendix A to Part 356 — Bidder Categories [ Last FR update*: 07/31/2013 ] Appendix B to Part 356 — Formulas and Tables [ Last FR update*: 07/28/2004 ] A. Treasury Non-indexed Securities [ Last FR update*: 07/28/2004 ] B. Treasury Inflation-Protected Securities [ Last FR update*: 07/28/2004 ] C. Treasury Floating Rate Notes [ Last FR update*: 07/28/2004 ] D. Accrued Interest [ Last FR update*: 07/28/2004 ] Definitions [ Last FR update*: 07/28/2004 ] Definitions [ Last FR update*: 07/28/2004 ] Definitions for Newly Issued Floating Rate Notes [ Last FR update*: 07/28/2004 ] Computing the Projected Cash Flows [ Last FR update*: 07/28/2004 ] Computing the Price [ Last FR update*: 07/28/2004 ] Computing the Projected Cash Flows [ Last FR update*: 07/28/2004 ] Computing the Price [ Last FR update*: 07/28/2004 ] Definitions for Reopenings of Floating Rate Notes and Calculation of Interest Payments [ Last FR update*: 07/28/2004 ] Computing the Accrued Interest [ Last FR update*: 07/28/2004 ] Computing the Projected Cash Flows [ Last FR update*: 07/28/2004 ] Computing the Price [ Last FR update*: 07/28/2004 ] Computing the Projected Cash Flows [ Last FR update*: 07/28/2004 ] Computing the accrued interest [ Last FR update*: 07/28/2004 ] Definitions for Newly Issued Floating Rate Notes with an Issue Date that Occurs after the Dated Date [ Last FR update*: 07/28/2004 ] Computing the accrued interest [ Last FR update*: 07/28/2004 ] Computing the Projected Cash Flows [ Last FR update*: 07/28/2004 ] Computing the price [ Last FR update*: 08/27/2013 ] Appendix C to Part 356 — Investment Considerations [ Last FR update*: 07/28/2004 ] A. Principal and Interest Variability [ Last FR update*: 07/28/2004 ] B. Trading in the Secondary Market [ Last FR update*: 07/28/2004 ] C. Tax Considerations [ Last FR update*: 07/28/2004 ] D. Indexing Issues [ Last FR update*: 07/28/2004 ] A. Interest Variability [ Last FR update*: 07/28/2004 ] B. Trading in the Secondary Market [ Last FR update*: 07/28/2004 ] C. Tax Considerations [ Last FR update*: 07/28/2004 ] D. Indexing Issues [ Last FR update*: 07/31/2013 ] Appendix D to Part 356 — Description of the Indexes [ Last FR update*: 07/31/2013 ] Authority: 5 U.S.C. 301; 31 U.S.C. 3102, et seq.; 12 U.S.C. 391. Source: 69 FR 45202, July 28, 2004, unless otherwise noted. Editorial Note: Nomenclature changes to part 356 appear at 70 FR 57439, Sept. 30, 2005. Subpart A—General Information
Chapter 31 of Title 31 of the United States Code authorizes the Secretary of the Treasury to issue United States obligations, and to offer them for sale with the terms and conditions that the Secretary prescribes. §356.1 To which securities does this circular apply?
The provisions in this part, including the appendices, and each individual auction announcement govern the sale and issuance of marketable Treasury securities issued on or after March 1, 1993. This part also governs all securities eligible for the STRIPS (Separate Trading of Registered Interest and Principal of Securities) Program (See §356.31.). In addition, these provisions and the auction announcements govern any other types of securities we may issue under this part. §356.2 What definitions do I need to know to understand this part?
13-week bill means a Treasury bill where the security description is “13-Week Bill” as referenced on the Treasury auction announcement.Accrued interest means an amount that bidders must pay to us for interest income as part of the settlement amount. Accrued interest compensates us up front for interest that bidders will be paid but did not earn because it is attributable to a period of time prior to the issue date. (See appendix B, section I, paragraph C of this part for additional explanation and examples.)Adjusted value means, for an interest component stripped from an inflation-protected security, an amount derived by:(1) Multiplying the semiannual interest rate by the par amount, and then(2) 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 of this part for an example of how to calculate the adjusted value.)Auction means a bidding process by which we sell marketable Treasury securities to the public.Autocharge agreement means an agreement in a format acceptable to Treasury between a submitter or clearing corporation and a depository institution that authorizes us to:(1) Deliver awarded securities to the book-entry securities account of a designated depository institution in the commercial book-entry system, and(2) Charge a funds account of a designated depository institution for the settlement amount of the securities.Bid means an offer to purchase a stated par amount of securities, either competitively or noncompetitively, in an auction.Bid-to-cover ratio means the total par amount of securities bid for in an auction divided by the total par amount of securities awarded. It excludes bids by, and awards to, the Federal Reserve for its own account.Bidder, as further defined in appendix A, means a person or an entity that offers to purchase Treasury securities in an auction either directly or through a depository institution or dealer. We may consider two or more persons or entities to be one bidder based on their relationship or their actions in participating in an auction. We consider a controlled account to be a bidder when an investment adviser bids in the name of the controlled account (See §356.15.).Bidder Identification Number means a number we assign to each institutional submitter and to certain other bidders. We assign such numbers either to identify certain bidders or to grant separate bidder status to different parts of the same corporate or partnership structure.Book-entry security means a security that is issued or maintained as an accounting entry or electronic record in either the commercial book-entry system or in one of Treasury's two direct-hold systems—TreasuryDirect® or Legacy Treasury Direct®. (See §356.4.)Business day means any day on which the Federal Reserve Banks are open for business.Call means the redemption of a security prior to maturity under the terms specified in its auction announcement.Certificate of indebtedness means a one-day non-interest-bearing security that may be held in TreasuryDirect and that automatically matures and is rolled over each day until its owner requests that it be redeemed.Clearing corporation means a clearing agency as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(23)). A clearing corporation must be registered with the Securities and Exchange Commission under section 17A of the Securities Exchange Act of 1934 and its rules.Competitive bid means a bid to purchase a stated par amount of securities at a specified yield, discount rate, or discount margin.Consumer Price Index (CPI) means the monthly non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics of the Department of Labor. We use the CPI as the basis for adjusting the principal amounts of inflation-protected securities. (See appendix D.)Corpus means the principal component of a security that has been stripped of its interest components.CUSIP number means the unique identifying number assigned to each separate security issue and each separate STRIPS component. CUSIP numbers are provided by the CUSIP Service Bureau of Standard & Poor's Corporation. CUSIP is an acronym for Committee on Uniform Securities Identification Procedures.Customer means a bidder that directs a depository institution or dealer to submit or forward a bid for a specific amount of securities in a specific auction on the bidder's behalf. Only depository institutions and dealers may submit bids for customers directly to us, or forward them to another depository institution or dealer.Dated date means the date from which interest accrues for notes and bonds. The dated date and issue date are usually the same. In those cases where interest begins accruing prior to the issue date, however, the dated date will be prior to the issue date. An example is when the dated date is a Saturday and the issue date is the following Monday.Dealer means an entity that is registered or has given notice of its status as a government securities broker or government securities dealer under Section 15C(a)(1) of the Securities Exchange Act of 1934.Delivery and payment agreement means a written agreement between a clearing corporation and a submitter, acknowledged by a Federal Reserve Bank, regarding securities awarded to the submitter for its own account. It authorizes us to deliver such securities to, and accept payment from, a depository institution acting on behalf of the clearing corporation under an acknowledged autocharge agreement.Depository institution means:(1) An entity described in Section 19(b)(1)(A), excluding subparagraph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A)).(2) Any agency or branch of a foreign bank as defined by the International Banking Act of 1978, as amended (12 U.S.C. 3101).Discount means the difference between par and the price of the security, when the price is less than par. (See appendix B for formulas and examples.)Discount amount means the discount divided by 100 and multiplied by the par amount. (See appendix B for formulas and examples.)Discount margin means the margin over the index that equates the present values of the assumed cash flows on a floating rate note to the sum of the price of and accrued interest on the floating rate note. The assumed cash flows are calculated based upon the index rate applicable to the dated date. Bidders in floating rate note auctions bid on the basis of discount margin. (See appendix B.)Discount rate means a rate of return, on an annual basis, on bills held until they mature. The discount rate is expressed in percentage terms and based on a 360-day year. It is also referred to as the “bank discount rate.” (See appendix B for formulas and examples.)Funds account means a cash account maintained by a depository institution at a Federal Reserve Bank.Index means the Consumer Price Index for inflation-protected securities. For floating rate notes, the index is the highest accepted discount rate on 13-week bills determined by Treasury auctions of those securities.Index rate means the simple-interest money market yield, computed on an actual/360 basis and rounded to nine decimal places, from the highest accepted discount rate of a 13-week bill auction as announced in the Treasury auction results press release. (See appendix B for methods and examples for computing the index rate.)Index ratio means, for an inflation-protected security, the Reference CPI of a particular date divided by the Reference CPI of the original issue date. (When the dated date is different from the original issue date, the denominator of the index ratio is the Reference CPI of the dated date rather than that of the original issue date.)Inflation-adjusted principal means, for an inflation-protected security, the value of the security derived by multiplying the par amount by the applicable index ratio as described in appendix B, section I, paragraph B.Interest rate means the annual percentage rate of interest paid on the par amount (or the inflation-adjusted principal) of a specific issue of notes or bonds. (See appendix B for methods and examples of interest calculations on notes and bonds.)Intermediary means a depository institution or dealer that forwards bids for customers to another depository institution or dealer. An intermediary does not submit bids directly to us.Issue date means the date specified in the auction announcement on which we issue a security as an obligation of the United States. Interest normally begins to accrue on a security's issue date.Legacy Treasury Direct means a non-Internet-based book-entry system maintained by Treasury for purchasing and holding marketable Treasury securities directly with Treasury. (See 31 CFR part 357.) Marketable security means a security that may be bought, sold and transferred in the secondary market.Maturity date means the date on which a security becomes due and payable, and ceases to earn interest. The maturity date is specified in the auction announcement.Minimum to bid means the smallest amount of a security that may be bid for in an auction as stated in the auction announcement.Multiple to bid means the smallest additional amount of a security that may be bid for in an auction as stated in the auction announcement.Multiple-price auction means an auction in which each successful competitive bidder pays the price equivalent to the yield, discount rate, or discount margin that it bid.Noncompetitive bid means, for a single-price auction, a bid to purchase a stated par amount of securities at the highest yield, discount rate, or discount margin awarded to competitive bidders. For a multiple-price auction, a noncompetitive bid means a bid to purchase securities at the weighted average yield, discount rate, or discount margin of awards to competitive bidders.Offering amount means the par amount of securities we are offering to the public for purchase in an auction, as specified in the auction announcement.Par means a price of 100. (See appendix B.)Par amount means the stated value of a security at original issuance.Person means a natural person.Premium means the difference between par and the price of the security, when the price is greater than par.Premium amount means the premium divided by 100 and multiplied by the par amount.Price means the price of a security per 100 dollars of its stated value as calculated using the formulas in appendix B.Real yield means, for an inflation-protected security, the yield based on the payment stream in constant dollars. In other words, the real yield is the yield in the absence of inflation.Reference CPI (Ref CPI) means, for an inflation-protected security, the index number applicable to a given date. (See appendix B, section I, paragraph B.)Reopening means the auction of an additional amount of an outstanding security.Security means a Treasury bill, note, or bond, each as described in this part. Security also means any other obligation we issue that is subject to this part according to its auction announcement. Security includes an interest or principal component under the STRIPS program, as well as a certificate of indebtedness in an investor's TreasuryDirect account.Settlement means final and complete payment for securities awarded in an auction and delivery of those securities.Settlement amount means the total of the par amount of securities awarded, less any discount amount or plus any premium amount, and plus any accrued interest. For inflation-protected securities, the settlement amount also includes any inflation adjustment when such securities are reopened or when the dated date is different from the issue date.Single-price auction means an auction in which all successful bidders pay the same price regardless of the yields, discount rates, or discount margins they each bid.Spread means the fixed amount over the life of a floating rate note that is added to the index rate in order to determine the interest rate of the floating rate note. The spread will be determined in the auction of a new floating rate note and is expressed in tenths of a basis point (i.e., to three decimals). Additionally, the spread will be equal to the high discount margin at the time a new floating rate note is auctioned.STRIPS (Separate Trading of Registered Interest and Principal of Securities) means our program under which eligible securities are authorized to be separated into principal and interest components, and transferred separately. These components are maintained and transferred in the commercial book-entry system.Submitter means a person or entity submitting bids directly to us for its own account, for customer accounts, or both. Only depository institutions and dealers are permitted to submit bids for customer accounts. We permit investment advisers to submit bids on behalf of controlled accounts.TINT means an interest component from a stripped security.TreasuryDirect means the book-entry, online system maintained by Treasury for purchasing and holding marketable Treasury securities, nonmarketable savings bonds, and certificates of indebtedness directly with Treasury. (See 31 CFR part 363.) We (or “us”) means the Secretary of the Treasury and his or her delegates, including the Department of the Treasury, Bureau of the Fiscal Service, and their representatives. The term also includes Federal Reserve Banks acting as fiscal agents of the United States.Weighted-average means the average of the yields, discount rates, or discount margins at which we award securities to competitive bidders in multiple-price auctions weighted by the par amount of securities allotted at each yield, discount rate, or discount margin.Yield means the annualized rate of return to maturity on a non-indexed security. Yield is expressed as a percentage. For an inflation-protected security, yield means the real yield. Yield is also referred to as “yield to maturity.” (See appendix B.)You means a prospective bidder in an auction.
The Treasury Department authorizes Federal Reserve Banks, as fiscal agents of the United States, to perform all activities necessary to carry out the provisions of this part, any auction announcements, and applicable regulations. §356.4 What are the book-entry systems in which auctioned Treasury securities may be issued or maintained?
There are three book-entry securities systems—the commercial book-entry system, TreasuryDirect®, and Legacy Treasury Direct®—into which we issue marketable Treasury securities. We maintain and transfer securities in these three book-entry systems (except that securities may not be transferred into the Legacy Treasury Direct system) at their par amount. Par amounts of Treasury inflation-protected securities do not include adjustments for inflation. Securities may be transferred from one system to the other (except that securities may not be transferred into the Legacy Treasury Direct system), unless the securities are not eligible to be held in the receiving system. Securities may be transferred from one system to the other, unless the securities are not eligible to be held in the receiving system. See Department of the Treasury Circular, Fiscal Service Series No. 2-86, as amended (part 357 of this chapter) and part 363 of this chapter.(a) The commercial book-entry system. When depository institutions or dealers submit bids for Treasury securities in an auction, securities awarded as a result of those bids are generally held in the commercial book-entry system. Specifically, we maintain book-entry accounts in the National Book-Entry System® (“NBES”) for Federal Reserve Banks, depository institutions, and other authorized entities, such as government and international agencies and foreign central banks. In their accounts, depository institutions maintain securities held for their own account and for the accounts of others. The accounts held for others include those of other depository institutions and dealers, which may, in turn, maintain accounts for others.(b) TreasuryDirect. In this system, account holders maintain accounts in a book-entry, online system directly on the records of the Bureau of the Fiscal Service, Department of the Treasury. Bids for securities to be held in TreasuryDirect are submitted through the Internet.(c) Legacy Treasury Direct. In this system, we maintain the book-entry securities of account holders directly on the records of the Bureau of the Fiscal Service, Department of the Treasury. Bids for securities to be held in Legacy Treasury Direct are submitted directly to us. From time to time, Treasury may announce that certain securities to be offered will not be eligible for purchase or holding in Legacy Treasury Direct.
We offer securities under this part exclusively in book-entry form and as direct obligations of the United States issued under Chapter 31 of Title 31 of the United States Code. The securities are subject to the terms and conditions in this part, the regulations in 31 CFR part 363 (for securities held in TreasuryDirect), the regulations in 31 CFR part 357 (for securities held in the commercial book-entry system and Legacy Treasury Direct), and the auction announcements. When we issue additional securities with the same CUSIP number as outstanding securities, we consider them to be the same securities as the outstanding securities.(a) Treasury bills. (1) Are issued at a discount or at par, depending upon the auction results;(2) Are redeemed at their par amount at maturity; and(3) Have maturities of not more than one year.(b) Treasury notes—(1) Treasury non-indexed1 notes.
By issuing an auction announcement, we provide public notice of the sale of bills, notes, and bonds. The auction announcement lists the specifics of each auction, e.g., offering amount, term and type of security, CUSIP number, and issue and maturity dates. The auction announcement and this part, including the Appendices, specify the terms and conditions of sale. If anything in the auction announcement differs from this part, the auction announcement will control. If you intend to bid, you should read the applicable auction announcement along with this part. §356.11 How are bids submitted in an auction?
(a) General. (1) All bids must be submitted using an approved method, which depends on whether you are requesting us to issue the awarded securities in the commercial book-entry system, in TreasuryDirect®, or in Legacy Treasury Direct® (See §356.4). The approved submission methods for these respective systems are explained in this section. A bidder must provide its assigned bidder identification numbers if it has been assigned one. We have the option of accepting or rejecting incomplete bids.(2) We must receive competitive and noncompetitive bids prior to their respective closing times, which are stated in the auction announcement. We will not include late bids in the auction. For bids other than those submitted on paper forms, our computer time stamp will establish the receipt time. You are bound by your bids after the closing time.(3) We are not responsible for any delays, errors, or omissions. We are not responsible for any failures or disruptions of equipment or communications facilities used for participating in Treasury auctions.(4) Submitters are responsible for bids submitted using computer equipment on their premises, whether or not such bids are authorized.(b) Commercial book-entry system. (1) If you are a submitter and the awarded securities are to be issued in the commercial book-entry system, you must submit bids using one of our approved electronic methods except for contingency situations.(2) You must have an agreement on file with us under which you agree to our terms and conditions for access to our system for participating in our auctions.(3) In contingency situations, such as a power outage, we may accept bids by a telephone call to designated Treasury employees if you submit them prior to the relevant bidding deadline.(c) TreasuryDirect. You must submit your bids through your established book-entry, online TreasuryDirect account. You may reinvest the proceeds of maturing securities held in TreasuryDirect by directing that the proceeds be used to purchase a certificate of indebtedness in your TreasuryDirect account and by using the proceeds of your certificate of indebtedness to pay for the securities.(d) Legacy Treasury Direct. (1) If you are a submitter and the awarded securities are to be issued in Legacy Treasury Direct, you may submit bids by using one of our approved methods, e.g., computer, automated telephone service, or paper forms. You may also reinvest the proceeds of maturing securities into new securities through the same methods.(2) If you are submitting bids by paper form, you must use forms authorized by the Bureau of the Fiscal Service and provide the requested information. We have the option of accepting or rejecting bids on any other form. You are responsible for ensuring that we receive bids in paper form on time. A noncompetitive bid is on time if:(i) We receive it on or before the issue date, and(ii) The envelope it arrived in bears evidence, such as a U.S. Postal Service cancellation, that it was mailed prior to the auction date.(3) If you are submitting a bid by computer or automated telephone service you must be an established Legacy Treasury Direct account holder with a Taxpayer Identification Number.(4) In contingency situations, such as a power outage, we may accept bids by other means, provided, that in all cases the bids are submitted prior to the relevant bidding deadline by an established Legacy Treasury Direct account holder.
(a) General. All bids must state the par amount of securities bid for and must equal or exceed the minimum to bid amount stated in the auction announcement. Bids in larger amounts must be in the multiple stated in the auction announcement.(b) Noncompetitive bids—(1) Maximum bid. You may not bid noncompetitively for more than $5 million. The maximum bid limitation does not apply if you are bidding solely through either a TreasuryDirect® or a Legacy Treasury Direct® reinvestment request. A request for reinvestment of securities maturing in either TreasuryDirect or Legacy Treasury Direct is a noncompetitive bid.(2) Additional restrictions. You may not bid noncompetitively in an auction in which you are bidding competitively. You may not bid noncompetitively if, in the security being auctioned, you hold a position in when-issued trading or in futures or forward contracts at any time between the date of the auction announcement and the time we announce the auction results. During this same timeframe, a noncompetitive bidder may not enter into any agreement to purchase or sell or otherwise dispose of the securities it is acquiring in the auction. For this paragraph, futures contracts include those:(i) That require delivery of the specific security being auctioned;(ii) For which the security being auctioned is one of several securities that may be delivered; or(iii) That are cash-settled.(c) Competitive bids—(1) Bid format—(i) Treasury bills. A competitive bid must show the discount rate bid, expressed with three decimals in .005 increments. The third decimal must be either a zero or a five, for example, 5.320 or 5.325. We will treat any missing decimals as zero, for example, a bid of 5.32 will be treated as 5.320. The rate bid may be a positive number or zero.(ii) Treasury non-indexed securities. A competitive bid must show the yield bid, expressed with three decimals, for example, 4.170. We will treat any missing decimals as zero, for example, a bid of 4.1 will be treated as 4.100. The yield bid may be a positive number or zero.(iii) Treasury inflation-protected securities. A competitive bid must show the real yield bid, expressed with three decimals, for example, 3.070. We will treat any missing decimals as zero, for example, a bid of 3 will be treated as 3.000. The real yield may be a positive number, a negative number, or zero.(iv) Treasury floating rate notes. A competitive bid must show the discount margin bid, expressed as a percentage with three decimals, for example, 0.290 percent. We will treat any missing decimals as zero, for example, a bid of 0.29 will be treated as 0.290. The discount margin bid may be positive, negative, or zero.(2) Maximum recognized bid. There is no limit on the maximum dollar amount that you may bid for competitively, either at a single yield, discount rate, or discount margin, or at different yields, discount rates, or discount margins. However, a competitive bid at a single yield, discount rate, or discount margin that exceeds 35 percent of the offering amount will be reduced to that amount. For example, if the offering amount is $10 billion, the maximum bid amount we will recognize at any one yield, discount rate, or discount margin from any bidder is $3.5 billion. (See §356.22 for award limitations.)(3) Additional restrictions. You may not bid competitively in an auction in which you are bidding noncompetitively. You may not bid competitively for securities to be bought through either TreasuryDirect or Legacy Treasury Direct.
(a) Net long position reporting threshold. (1) If you are bidding competitively in an auction, you must report your net long position when the total of your bids plus your net long position in the security being auctioned equals or exceeds the net long position reporting threshold (See table.). We will specify this threshold in the auction announcement for each security (See §356.10.). The threshold is typically 35 percent of the offering amount, but we may state a different threshold in the auction announcement. To see whether you must report your net long position, follow this table: If . . .And if . . .Then . . .(i) the total of your bids and your net long position in the security being auctioned equals or exceeds the reporting thresholdyou must report your net long position (which does not include your bids).(ii) the total of your bids in the auction equals or exceeds the reporting thresholdyou have no position or a net short position in the security being auctionedyou must report a zero.(iii) the total of your bids and your net long position in the security being auctioned is less than the reporting thresholdyou may either report nothing (leave the field blank) or report your net long position.(2) Also, if you have more than one bid in an auction and you must report either your net long position or a zero, you must report that figure only once. Finally, if you are a customer and must report either your net long position or a zero, you must report that figure through only one depository institution or dealer. (See §356.14(d).)(b) “As of” time for calculating net long position. You must calculate your net long position as of one half-hour prior to the closing time for receipt of competitive bids.(c) Components of the net long position. Except as modified in paragragh (d) of this section, your net long position is the sum total of the par amounts of:(1) Your holdings of outstanding securities with the same CUSIP number as the security being auctioned;(2) Your holdings of STRIPS principal components of the security being auctioned, and;(3) Your positions, in the security being auctioned, in:(i) When-issued trading, including when-issued trading positions of the STRIPS principal components;(ii) Futures contracts that require delivery of the specific security being auctioned (but not futures contracts for which the security being auctioned is one of several securities that may be delivered, and not futures contracts that are cash-settled); and(iii) Forward contracts that require delivery of the specific security being auctioned or of the STRIPS principal component of that security.(d) Calculating the net long position in a reopening. In a reopening (additional issue) of an outstanding security, you may subtract the exclusion amount stated in the auction announcement from:(1) Your holdings of the outstanding securities (paragraph (c)(1) of this section) combined with(2) Your holdings of STRIPS principal components of the security being auctioned (paragraph (c)(2) of this section). We will specify the amount of holdings that you may exclude from the net long position calculation in the auction announcement. You may not take the exclusion if your combined holdings are zero or less. The exclusion is optional, but if you take the exclusion, you must include any holdings that exceed the exclusion amount in calculating your net long position. If the exclusion amount is greater than your combined holdings (paragraphs (c)(1) and (2) of this section), you may calculate the combined holdings as zero, but they cannot be included in the calculation as a negative number. §356.14 What are the requirements for submitting bids for customers?
(a) Institutions that may submit bids for customers. Only depository institutions or dealers may submit bids for customers (see definitions at §356.2), or for customers of intermediaries, under the requirements set out in this section.(b) Payment. Submitters must remit payment for bids they submit on behalf of customers, including customers of intermediaries, that result in awards of securities in the auction.(c) Identifying customers. Submitters must provide the names of customers whenever they submit bids for them. Submitters must provide the names of their direct customers as well as customers of any intermediaries who are forwarding customer bids. For individuals, submitters must provide the customer's full name (first and last). For institutional customers, submitters must provide the name of the institution, and the bidder identification number if the customer provides it. For trusts or other fiduciary estates (See appendix A.), submitters must provide on the customer list:(1) The full name or title of the trustee or fiduciary;(2) A reference to the document creating the trust or fiduciary estate with date of execution; and(3) The employer identification number (not social security number) of the trust or fiduciary estate. We do not consider trusts to be a separate bidder that have not been assigned, or that do not provide, an employer identification number.(d) Competitive customer bids. For each customer competitive bid, the submitter must provide the customer's name, the amount bid, and the yield, discount rate, or discount margin. The submitter or intermediary must also report the net long position amount if the customer provides it. The submitter must inform a customer of the net long position reporting requirement (See §356.13.) if the customer is bidding for $100 million or more of securities. If the submitter's or intermediary's personnel know that the customer's position information is not correct, the submitter or intermediary may not submit the customer's bid.(e) Noncompetitive customer bids. For each noncompetitive bid, the submitter must provide the customer's name and the amount bid. Submitters may either provide the customer's name with the bid or, if the list of customers is lengthy, the submitter may provide a summary bid amount covering all noncompetitive customers. If it provides a summary bid amount, the submitter must transmit the list of individual customers and their bid amounts by close of business on the auction day. However, the submitter must be able to provide the customer list details by the noncompetitive bidding deadline if requested.
(a) General. The auction rules that apply to investment advisers are determined by the relationship between “investment advisers” and “controlled accounts.” An investment adviser means any person or entity that has investment discretion for the bids or positions of a different person or entity (a controlled account). A person or entity has investment discretion if it determines what, how many, and when securities will be purchased or sold on behalf of another person or entity. We consider a person that is employed or supervised by an investment adviser to be part of that investment adviser. We also consider the bids or positions of controlled accounts to be separate from the bids or positions of the person or entity with which they would otherwise be associated under the bidder categories in appendix A of this part.(b) Bidding options. (1) An investment adviser has two options for whose name to use when bidding on behalf of controlled accounts.
(a) Submitters. If you submit bids or other information in an auction, we deem you to have certified that:(1) You are in compliance with this part and the auction announcement;(2) The information provided with regard to any bids for your own account is accurate and complete; and(3) The information provided with regard to any bids for customers accurately and completely reflects information provided by your customers or intermediaries.(b) Intermediaries. If you forward bids in an auction, we deem you to have certified that:(1) You are in compliance with this part and the applicable auction announcement; and(2) That the information you provided to a submitter or other intermediary with regard to bids for customers accurately and completely reflects information provided by those customers or intermediaries.(c) Customers. By bidding for a security as a customer we deem you to have certified that:(1) You are in compliance with this part and the auction announcement and;(2) The information you provided to the submitter or intermediary in connection with the bid is accurate and complete.
(a) General. By bidding in an auction, you agree to pay the settlement amount for any securities awarded to you. (See §356.25.) For notes and bonds, the settlement amount may include a premium amount, accrued interest, and, for inflation-protected securities, an inflation adjustment.(b) TreasuryDirect®. You must pay for your awarded securities by a debit entry to a deposit account that you are authorized to debit or by using the redemption proceeds of your certificate of indebtedness held in your TreasuryDirect account. Payment by debit entry occurs on the settlement date for the actual settlement amount due. (See §356.25.)(c) Legacy Treasury Direct®. Unless you make other provisions, you must pay by debit entry to a deposit account that you are authorized to debit or submit payment with your bids. Payment by debit entry occurs on the settlement date for the actual settlement amount due. (See §356.25.) If you are paying with a check or with maturing securities, you must pay separately for any premium, accrued interest, or inflation adjustment as soon as you receive your Payment Due Notice.(1) Bidding and payment by computer or by telephone. If you are bidding by computer or by telephone, you must pay for any securities awarded to you by debit entry to a deposit account.(2) Bidding and payment by paper form. If you are mailing bids to us on a paper form, you may either enclose your payment with the form or pay for any securities awarded to you by debit entry to a deposit account. For bills, you may pay by depository institution (cashier's or teller's) check, certified check, or currently dated Treasury or fiscal agency check made payable to you. For notes or bonds, in addition to the payment options for bills, you may also pay by personal check. If you submit a personal check, make it payable to Legacy Treasury Direct and mail it with the bid to the Federal Reserve Bank handling your account. In your payment amount you must include the par amount and any announced accrued interest and/or inflation adjustment.(3) Payment by maturing securities. You may use maturing securities held in Legacy Treasury Direct as payment for reinvestments into new securities that we are offering, as long as we receive the appropriate transaction request on time.(d) Commercial book-entry system. Unless you make other provisions, payment of the settlement amount must be by charge to the funds account of a depository institution at a Federal Reserve Bank.(1) A submitter that does not have a funds account at a Federal Reserve Bank or that chooses not to pay by charge to its own funds account must have an approved autocharge agreement on file with us before submitting any bids. Any depository institution whose funds account will be charged under an autocharge agreement will receive advance notice from us of the total par amount of, and price to be charged for, securities awarded as a result of the submitter's bids.(2) A submitter that is a member of a clearing corporation may instruct that delivery and payment be made through the clearing corporation for securities awarded to the submitter for its own account. To do this, the following requirements must be met prior to submitting any bids:(i) We must have acknowledged and have on file an autocharge agreement between the clearing corporation and a depository institution. By entering into such an agreement, the clearing corporation authorizes us to provide aggregate par and price information to the depository institution whose funds account will be charged under the agreement. The clearing corporation is responsible for remitting payment for auction awards of the clearing corporation member.(ii) We must have acknowledged and have on file a delivery and payment agreement between the submitter and the clearing corporation. By entering into such an agreement, the submitter authorizes us to provide award and payment information to the clearing corporation.
(a) Determining the range and amount of accepted competitive bids—(1) Accepting bids. First we accept in full all non-competitive bids that were submitted by the noncompetitive bidding deadline. After the closing time for receipt of competitive bids we start accepting those at the lowest yields, discount rates, or discount margins, through successively higher yields, discount rates, or discount margins, up to the amount required to meet the offering amount. When necessary, we prorate bids at the highest accepted yield, discount rate, or discount margin as described below. If the amount of noncompetitive bids would absorb all or most of the offering amount, we will accept competitive bids in an amount sufficient to provide a fair determination of the yield, discount rate, or discount margin for the securities we are auctioning.(2) Accepting bids at the high yield, discount rate, or discount margin. Generally, the total amount of bids at the highest accepted yield, discount rate, or discount margin exceeds the offering amount remaining after we accept the noncompetitive bids and the competitive bids at the lower yields, discount rates, or discount margins. In order to keep the total amount of awards as close as possible to the announced offering amount, we award a percentage of the bids at the highest accepted yield, discount rate, or discount margin. We derive the percentage by dividing the remaining par amount needed to fill the offering amount by the par amount of the bids at the high yield, discount rate, or discount margin and rounding up to the next hundredth of a whole percentage point, for example, 17.13%.(b) Determining the interest rate for new note and bond issues. We set the interest rate at a 1/8 of one percent increment. If a Treasury note or bond auction results in a yield lower than 0.125 percent, the interest rate will be set at 1/8 of one percent, and successful bidders' award prices will be calculated accordingly (see appendix B to this part for formulas).(1) Single-price auctions. The interest rate we establish produces the price closest to, but not above, par when evaluated at the yield of awards to successful competitive bidders.(2) Multiple-price auctions. The interest rate we establish produces the price closest to, but not above, par when evaluated at the weighted-average yield of awards to successful competitive bidders.(c) Determining the interest rate for floating rate notes. The interest rate will be the spread plus the index rate (as it may be adjusted on the calendar day following each auction of 13-week bills) subject to a minimum daily interest accrual rate of zero percent.(d) Determining purchase prices for awarded securities. We round price calculations to six decimal places on the basis of price per hundred, for example, 99.954321 (See appendix B to this part).(1) Single-price auctions. We award securities to both noncompetitive and competitive bidders at the price equivalent to the highest accepted yield, discount rate, or discount margin at which bids were accepted. For inflation-protected securities, the price for awarded securities is the price equivalent to the highest accepted real yield.(2) Multiple-price auctions—(i) Competitive bids. We award securities to competitive bidders at the price equivalent to each yield, discount rate, or discount margin at which their bids were accepted.(ii) Noncompetitive bids. We award securities to noncompetitive bidders at the price equivalent to the weighted average yield, discount rate, or discount margin of accepted competitive bids.
(a) Awards to submitters. We generally prorate bids at the highest accepted yield, discount rate, or discount margin under §356.20(a)(2) of this part. For example, if 80.15% is the announced percentage at the highest yield, discount rate, or discount margin, we award 80.15% of the amount of each bid at that yield, discount rate, or discount margin. A bid for $100 million at the highest accepted yield, discount rate, or discount margin would be awarded $80,150,000 in this example. We always make awards for at least the minimum to bid, and above that amount we make awards in the appropriate multiple to bid. For example, Treasury bills may be issued with a minimum to bid of $100 and multiples to bid of $100. Say we accept an $18,000 bid at the high discount rate, and the percent awarded at the high discount rate is 88.27%. We would award $15,900 to that bidder, which is an upward adjustment from $15,888.60 ($18,000 × .8827) to the nearest multiple of $100. If we were to award 4.65% of bids at the highest accepted rate, for example, the award for a $100 bid at that rate would be $100, rather than $4.65, in order to meet the minimum to bid for a bill issue.(b) Awards to customers. The same prorating rules apply to customers as apply to submitters. Depository institutions and dealers, whether submitters or intermediaries, are responsible for prorating awards for their customers at the same percentage that we announce. For example, if 80.15% is the announced percentage at the highest yield, discount rate, or discount margin, then each customer bid at that yield, discount rate, or discount margin must be awarded 80.15%.
(a) Awards to noncompetitive bidders. The maximum award to any noncompetitive bidder is $5 million. This limit does not apply to bidders bidding solely through TreasuryDirect® or Legacy Treasury Direct® reinvestment requests.(b) Awards to competitive bidders. The maximum award is 35 percent of the offering amount less the bidder's net long position as reportable under §356.13. For example, in a note auction with a $10 billion offering amount, and therefore a maximum award of $3.5 billion, a bidder with a reported net long position of $1 billion could receive a maximum auction award of $2.5 billion. When the bids and net long positions of more than one person or entity must be combined, as is the case with investment advisers and controlled accounts (See §356.15(c).), we will use this combined amount for the purpose of this 35 percent award limit.
(a) After the conclusion of the auction, we will announce the auction results through a press release that is available on our Web site at http://www.treasurydirect.gov.(b) The press release will include such information as:(1) The amounts of bids we accepted and the amount of securities we awarded;(2) The range of accepted yields, discount rates, or discount margins.(3) The proration percentage;(4) The interest rate for a note or bond;(5) A breakdown of the amounts of noncompetitive and competitive bids we accepted from, and awarded to, the public;(6) The amounts of bids tendered and accepted from the Federal Reserve Banks for their own accounts;(7) The bid-to-cover ratio; and(8) Other information that we may decide to include.
(a) Notice of awards—(1) Notice to submitters. We will provide notice to all submitters letting them know whether their bids were successful or not.(2) Notice to clearing corporations. If we are to deliver awarded securities under a delivery and payment agreement, we will provide notice of the awards to the clearing corporation that is a party to the agreement.(b) Notification of awards to customers. If you are a submitter for customers, you are responsible for notifying them of their awards. You are also responsible for notifying any intermediaries that forwarded successful bids to you. Similarly, an intermediary is responsible for providing notification of any awards to its customers and any intermediaries from whom it received bids.(c) Notification of awards and settlement amounts to a depository institution having an autocharge agreement with a submitter or a clearing corporation. We will provide notice to each depository institution that has entered into an autocharge agreement with a submitter or a clearing corporation of the amount to be charged, on the issue date, to the institution's funds account at the Federal Reserve Bank servicing the institution. We will provide this notification no later than the day after the auction.(d) Customer confirmation—(1) Customer requirements—(i) When and how must a customer confirm its awards? Any customer awarded a par amount of $2 billion or more in an auction must send us a confirmation in written form or via e-mail containing the information in paragraph (d)(1)(ii) of this section. The confirmation must be sent no later than 10 a.m. Eastern Time on the next business day following the auction. If sent in written form, the confirmation must be signed by the customer or authorized representative. Confirmations sent by e-mail must be sent by the customer or authorized representative. Confirmations signed or sent by an authorized representative must include the capacity in which the representative is acting.(ii) What must the customer include in its confirmation? The information the customer must provide is:(A) A confirmation of the awarded bid(s), including the name of each submitter that submitted the bid(s) on the customer's behalf, and(B) A statement indicating whether the customer had a reportable net long position as defined in §356.13. If a position had to be reported, the statement must provide the amount of the position and the name of the submitter that the customer requested to report the position.(2) Submitter or intermediary requirements. A submitter or intermediary submitting or forwarding bids for a customer must notify the customer of the customer confirmation reporting requirement if we award the customer $2 billion or more as a result of those bids.
Securities bought in the auction must be paid for by the issue date. The payment amount for awarded securities will be the settlement amount as defined in §356.2. (See formulas in appendix B.) There are several ways to pay for securities:(a) Payment by debit entry to a deposit account. If you are paying by debit entry to a deposit account as provided for in §356.17 (b) and (c), we will charge the settlement amount to the specified account on the issue date.(b) Payment by authorized charge to a funds account. Where the submitter's method of payment is an authorized charge to the funds account of a depository institution as provided for in §356.17 (d), we will charge the settlement amount to the specified funds account on the issue date.(c) Payment through a certificate of indebtedness. If you are paying with the redemption proceeds of your certificate of indebtedness as provided for in §356.17(b), we will redeem the certificate of indebtedness for the settlement amount of the security and apply the proceeds on the issue date.(d) Payment with bids. If you paid the par amount with your bids as provided for in §356.17 (c)(2), you may have to pay an additional amount, or we may have to pay an amount to you, as follows:(1) When we owe an amount to you. If the amount you paid is more than the settlement amount, we will refund the balance to you after the auction. This will generally occur if you submit payment with your bids. A typical example would be an auction where the price is a discount from par and there is no accrued interest.(2) When you must remit an additional amount. If the settlement amount is more than the amount you paid, we will notify you of the additional amount due. You may owe us such an additional amount if the auction calculations result in a premium or if accrued interest or an inflation adjustment is due. If your securities are to be held in TreasuryDirect®, we will collect this amount through the same payment method that you previously authorized for the transaction. If your securities are to be held in Legacy Treasury Direct®, you will be responsible for remitting this additional amount immediately.
(a) General. We will pay principal on bills, notes, and bonds on the maturity date as specified in the auction announcement. Interest on bills consists of the difference between the discounted amount paid by the investor at original issue and the par value we pay to the investor at maturity. Interest on notes and bonds accrues from the dated date. Interest is payable on a semiannual or quarterly basis on the interest payment dates specified in the auction announcement through the maturity date. If any principal or interest payment date is a Saturday, Sunday, or other day on which the Federal Reserve System is not open for business, we will make the payment (without additional interest) on the next business day. If a bond is callable, we will pay the principal prior to maturity if we call it under its terms, which include providing appropriate public notice.(b) Treasury inflation-protected securities. (1) This table explains the amount that we will pay to holders of inflation-protected securities at maturity.
(a) General. Notes or bonds (other than Treasury floating rate notes) may be “stripped”—divided into separate principal and interest components. These components must be maintained in the commercial book-entry system. Stripping is done at the option of the holder, and may occur at any time from issuance until maturity. We provide the CUSIP numbers and payment dates for the principal and interest components in auction announcements and on our Web site at http://www.treasurydirect.gov.(b) Treasury non-indexed securities (notes and bonds other than Treasury inflation-protected securities or Treasury floating rate notes)—(1) Minimum par amounts required for STRIPS. The minimum par amount of a non-indexed security that may be stripped is $100. Any par amount to be stripped above $100 must be in a multiple of $100.(2) Principal components. Principal components stripped from non-indexed securities are maintained in accounts, and transferred, at their par amount. They have a CUSIP number that is different from the CUSIP number of the fully constituted (unstripped) security.(3) Interest components. Interest components stripped from non-indexed securities have the following features:(i) They are maintained in accounts, and transferred, at their original payment value, which is derived by multiplying the semiannual interest rate and the par amount;(ii) Their interest payment date becomes the maturity date for the component;(iii) All interest components with the same maturity date have the same CUSIP number, regardless of the underlying security from which the interest payments were stripped, and therefore are fungible (interchangeable).(iv) the CUSIP numbers of interest components are different from the CUSIP numbers of principal components and fully constituted securities, even if they have the same maturity date, and therefore are not fungible.(c) Treasury inflation-protected securities—(1) Minimum par amounts required for STRIPS. The minimum par amount of an inflation-protected security that may be stripped is $100. Any par amount to be stripped above $100 must be in a multiple of $100. (2) Principal components. Principal components stripped from inflation-protected securities are maintained in accounts, and transferred, at their par amount. At maturity, the holder will receive the inflation-adjusted principal or the par amount, whichever is greater. (See §356.30.) A principal component has a CUSIP number that is different from the CUSIP number of the fully constituted (unstripped) security.(3) Interest components—(i) Adjusted value. Interest components stripped from inflation-protected securities are maintained in accounts, and transferred, at their adjusted value. This value 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. (The dated date is used instead of the original issue date when the dates are different.) See appendix B, section IV of this part for an example of how to do this calculation.(ii) CUSIP numbers. When an interest payment is stripped from an inflation-protected security, the interest payment date becomes the maturity date for the component. All interest components with the same maturity date have the same CUSIP number, regardless of the underlying security from which the interest payments were stripped. Such interest components are fungible (interchangeable). The CUSIP numbers of interest components are different from the CUSIP numbers of principal components and fully constituted securities, even if they have the same maturity date.(iii) Payment at maturity. 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 of this part for an example of how to do this calculation.(iv) Rebasing of the CPI. If the CPI is rebased to a different time base reference period (See appendix D.), the adjusted values of all outstanding inflation-protected interest components will be converted to adjusted values based on the new base reference period. At that time, we will publish information that describes how this conversion will occur. After rebasing, any interest components created from a security that was issued during a prior base reference period will be issued with adjusted values calculated using reference CPIs under the most-recent base reference period.(d) Reconstituting a security. Stripped interest and principal components may be reconstituted, that is, put back together into 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. Because inflation-protected interest components are different from non-indexed interest components, they are not interchangeable for reconstitution purposes.(e) Applicable regulations. Subparts A, B, and D of part 357 of this chapter govern notes and bonds stripped into their STRIPS components, unless we state differently in this part.
(a) General. Securities issued under this part are subject to all applicable taxes imposed under the Internal Revenue Code of 1986, or its successor. Under section 3124 of title 31, United States Code, the securities are exempt from taxation by a State or political subdivision of a State, except for State estate or inheritance taxes and other exceptions as provided in that section.(b) Treasury inflation-protected securities. Special federal income tax rules for inflation-protected securities, including stripped inflation-protected principal and interest components, are set forth in Internal Revenue Service regulations.(c) Treasury floating rate notes. Special federal income tax rules for floating rate notes are set forth in Internal Revenue Service regulations.
(a) We have the discretion to:(1) Accept, reject, or refuse to recognize any bids submitted in an auction;(2) Award more or less than the amount of securities specified in the auction announcement;(3) Waive any provision of this part for any bidder or submitter; and(4) Change the terms and conditions of an auction.(b) Our decisions under this part are final. We will provide a public notice if we change any auction provision, term, or condition.(c) We reserve the right to modify the terms and conditions of new securities and to depart from the customary pattern of securities offerings at any time. §356.34 What could happen if someone does not fully comply with the auction rules or fails to pay for securities?
(a) General. If a person or entity fails to comply with any of the auction rules in this part, we will consider the circumstances and take what we deem to be appropriate action. This could include barring the person or entity from participating in future auctions under this part. We also may refer the matter to an appropriate regulatory agency.(b) Liquidated damages. If you fail to pay for awarded securities in a timely manner, we may require you to pay liquidated damages of up to one percent of the par amount of securities we awarded to you. Our use of this liquidated damages remedy does not preclude us from using any other appropriate remedy. §356.35 Who approved the information collections?
The Office of Management and Budget approved the collections of information contained in §§356.11, 356.12, 356.13, 356.14, and 356.15 and in appendix A of this part under control number 1535-0112. Appendix A to Part 356—Bidder Categories I. Categories of Eligible Bidders
We describe below various categories of bidders eligible to bid in Treasury auctions. You may use them to determine whether we consider you and other persons or entities to be one bidder or more than one bidder for auction bidding and compliance purposes. For example, we use these definitions to apply the competitive and noncompetitive award limitations and for other requirements. Notwithstanding these definitions, we consider any persons or entities that intentionally act together with respect to bidding in a Treasury auction to collectively be one bidder. Even if an auction participant does not fall under any of the categories listed below, it is our intent that no auction participant receives a larger auction award by acquiring securities through others than it could have received had it been considered one of these types of bidders.(a) Corporation—We consider a corporation to be one bidder. A corporation includes all of its affiliates, which may be persons, partnerships, or other entities. We consider a business trust, such as a Massachusetts or Delaware business trust, to be a corporation. We use the term “corporate structure” to refer to the collection of affiliates that we consider collectively to be one bidder. An affiliate is any: Entity that is more than 50-percent owned, directly or indirectly, by the corporation; Entity that is more than 50-percent owned, directly or indirectly, by any other affiliate of the corporation; Person or entity that owns, directly or indirectly, more than 50 percent of the corporation; Person or entity that owns, directly or indirectly, more than 50 percent of any other affiliate of the corporation; or Entity, a majority of whose board of directors or a majority of whose general partners are directors or officers of the corporation, or of any affiliate of the corporation.An entity that is more than 50-percent owned as described in this definition is not an affiliate, however, if: The purpose of such ownership is to seek a return on investment and not to engage in the business of the entity; The owner does not routinely exercise operational or management control over the entity; The owner does not exercise any control over investment decisions of the entity regarding U.S. Treasury securities; The corporation has written policies or procedures, including ongoing compliance monitoring processes, that are designed to prevent it from acting together with the entity regarding participation in Treasury auctions or investment strategies regarding Treasury securities being auctioned; and The corporation submits notice and certification to us, as provided in this appendix A.A corporation that plans to make use of this exception to the definition of “affiliate” must inform us of this fact in writing and provide the following certification:[Name of corporation] hereby certifies that, with regard to any entity of which it owns more than 50 percent as defined in appendix A to 31 CFR part 356, but for which the purpose of such ownership is to seek a return on investment and not to engage in the business of the entity: We do not routinely exercise operational or management control over the entity; We do not exercise any control over investment decisions of the entity regarding U.S. Treasury securities; We have written policies or procedures, including ongoing compliance monitoring processes, that are designed to prevent the corporation from acting together with the entity regarding participation in Treasury auctions or investment strategies regarding Treasury securities being auctioned; and We will continue to meet the terms of this certification until we notify the Treasury of a change.(b) Partnership—We consider a partnership to be one bidder if it is a partnership for which the Internal Revenue Service has assigned a tax-identification number. A partnership includes all of its affiliates, which may be persons, corporations, general partners acting on behalf of the partnership, or other entities. We use the term “partnership structure” to refer to the collection of affiliates that we consider collectively to be one bidder. We may consider a partnership structure that contains one or more corporations as a “partnership” or a “corporation,” but not both.An affiliate is any: Entity that is more than 50-percent owned, directly or indirectly, by the partnership; Entity that is more than 50-percent owned, directly or indirectly, by any other affiliate of the partnership; Person or entity that owns, directly or indirectly, more than 50 percent of the partnership; Person or entity that owns, directly or indirectly, more than 50 percent of any other affiliate of the partnership; or Entity, a majority of whose general partners or a majority of whose board of directors are general partners or directors of the partnership or of any affiliate of the partnership.An entity that is more than 50-percent owned as described in this definition is not an affiliate, however, if: The purpose of such ownership is to seek a return on investment and not to engage in the business of the entity; The owner does not routinely exercise operational or management control over the entity; The owner does not exercise any control over investment decisions of the entity regarding U.S. Treasury securities; The partnership has written policies or procedures, including ongoing compliance monitoring processes, that are designed to prevent it from acting together with the entity regarding participation in Treasury auctions or investment strategies regarding Treasury securities being auctioned; and The partnership submits notice and certification to us, as provided in this appendix A.A partnership that plans to make use of this exception to the definition of “affiliate” must inform us of this fact in writing and provide the following certification:[Name of partnership] hereby certifies that, with regard to any entity of which it owns more than 50 percent as defined in appendix A to 31 CFR part 356, but for which the purpose of such ownership is to seek a return on investment and not to engage in the business of the entity: We do not routinely exercise operational or management control over the entity; We do not exercise any control over investment decisions of the entity regarding U.S. Treasury securities; We have written policies or procedures, including ongoing compliance monitoring processes, that are designed to prevent the partnership from acting together with the entity regarding participation in Treasury auctions or investment strategies regarding Treasury securities being auctioned; and We will continue to meet the terms of this certification until we notify the Treasury of a change.(c) Government-related entity—We consider each of the following entities to be one bidder:(1) A state government or the government of the District of Columbia(2) A unit of local government, including any county, city, municipality, or township, or other unit of general government as defined by the Bureau of the Census for statistical purposes.(3) A commonwealth, territory, or possession of the United States.(4) A governmental entity, body, or corporation established under Federal, State, or local law.(5) A foreign central bank, the government of a foreign state, or an international organization in which the United States holds membership. This type of entity applies only when such entity is not using an account at the Federal Reserve Bank of New York (See paragraph (f).).We generally consider an investment, reserve, or other fund of one of the above government-related entities as part of that entity and not a separate bidder. We will consider a government-related entity's fund to be a separate bidder if it meets the definition of the “trust or other fiduciary estate” category, or if applicable law requires that the investments of such fund be made separately.(d) Trust or other fiduciary estate—We consider a legal entity created under a valid trust instrument, court order, or other legal authority that designates a trustee or fiduciary to act for the benefit of a named beneficiary to be one bidder. The following conditions must also be met for us to consider a trust entity to be one bidder: The legal entity must be able to be identified by:1. The name or title of the trustee or fiduciary;2. Specific reference to the trust instrument, court order, or legal authority under which the trustee or fiduciary is acting; and3. The unique IRS-assigned employer identification number (not social security number) for the entity. The trustee or fiduciary must make the decisions on participating in auctions on behalf of the trust or fiduciary estate.(e) Individual—We consider a person to be one bidder, regardless of whether he or she is acting as an individual, a sole proprietor, or for any entity not otherwise defined as a bidder. If a person meets the definition of an affiliate within a corporate or partnership structure, we will consider him or her to be a bidder in this “individual” category if the corporation or partnership is not bidding in the same auction. We do not consider a person acting in an official capacity as an employee or other representative of a bidder defined in any other category to be an “individual” bidder. We consider a person, his or her spouse, and any children under the age of 21 having a common household to be one “individual” bidder.(f) Foreign and International Monetary Authority (“FIMA”)—We consider one or more parties making up a foreign or international monetary organization that is not private in nature to be a bidder called a FIMA entity if at least one of the parties is a foreign or international entity that is (i) financial in nature, or (ii) not financial in nature but is authorized to open an account at the Federal Reserve Bank of New York. We consider each of the following entities to be a single FIMA entity:(1) A foreign central bank or regional central bank.(2) A foreign governmental monetary or finance entity.(3) A non-governmental international financial organization that is not private in nature (for example, the International Monetary Fund, the World Bank, the Inter-American Development Bank, and the Asian Development Bank).(4) A non-financial international organization that the United States participates in (for example, the United Nations).(5) A multi-party arrangement of a governmental ministry and/or a foreign central bank or monetary authority with a United States Government Department and/or the Federal Reserve Bank of New York.(6) A foreign or international monetary entity or an entity authorized by statute or by us to open accounts at the Federal Reserve Bank of New York.(g) Other Bidder—We do not consider a bidder defined by any of the above categories to be a bidder in this category. For purposes of this definition, “other bidder” means an institution or organization with a unique IRS-assigned employer identification number. This definition includes such entities as an association, church, university, union, or club. This category does not include any person or entity acting in a fiduciary or investment management capacity, a sole proprietorship, an investment account, an investment fund, a form of registration, or investment ownership designation.
Table 1 Interest period Beginning and ending days are 1st or 15th of the months listed under interest period(number of days) Beginning and ending days are the last days of the months listed under interest period(number of days) Regular year Leap year Regular year Leap year January to July181182181182 February to August181182184184 March to September184184183183 April to October183183184184 May to November184184183183 June to December183183184184 July to January184184184184 August to February184184181182 September to March181182182183 October to April182183181182 November to May181182182183 December to June182183181182Table 2 below shows the daily interest decimals covering interest from 1/8 % to 20% on $1,000 for one day in increments of 1/8 of one percent. These decimals represent 1/181 , 1/182 , 1/183 , or 1/184 of a full semiannual interest payment, depending on which half-year is applicable.
A 2-year note paying 83/8 % interest was issued on July 2, 1990, with the first interest payment on December 31, 1990. The number of days in the full half-year period of June 30 to December 31, 1990, was 184 (See Table 1.). The number of days for which interest actually accrued was 182 (not including July 2, but including December 31). The daily interest decimal, $0.227581522 (See Table 2, line for 83/8 %, under the column for half-year of 184 days.), was multiplied by 182, resulting in a payment of $41.419837004 per $1,000. For $20,000 of these notes, $41.419837004 would be multiplied by 20, resulting in a payment of $828.39674008 ($828.40).4. Long First Payment Period. In cases where the first interest payment period for a bond or note covers more than a full half-year period (a “long coupon”), we multiply the daily interest decimal by the number of days from, but not including, the issue date to, and including, the last day of the fractional period that ends one full half-year before the interest payment date. We add that amount to the regular interest amount for the full half-year ending on the first interest payment date, resulting in the amount of interest payable for $1,000 par amount. In cases where the par amount of securities is a multiple of $1,000, the appropriate multiple should be applied to the unrounded interest payment amount per $1,000 par amount.
A 5-year 2-month note paying 77/8 % interest was issued on December 3, 1990, with the first interest payment due on August 15, 1991. Interest for the regular half-year portion of the payment was computed to be $39.375 per $1,000 par amount. The fractional portion of the payment, from December 3 to February 15, fell in a 184-day half-year (August 15, 1990, to February 15, 1991). Accordingly, the daily interest decimal for 77/8 % was $0.213994565. This decimal, multiplied by 74 (the number of days from but not including December 3, 1990, to and including February 15), resulted in interest for the fractional portion of $15.835597810. When added to $39.375 (the normal interest payment portion ending on August 15, 1991), this produced a first interest payment of $55.210597810, or $55.21 per $1,000 par amount. For $7,000 par amount of these notes, $55.210597810 would be multiplied by 7, resulting in an interest payment of $386.474184670 ($386.47).
Where Date = valuation date3. Reference CPI. The Ref CPI for the first day of any calendar month is the CPI for the third preceding calendar month. For example, the Ref CPI applicable to April 1 in any year is the CPI for January, which is reported in February. We determine the Ref CPI for any other day of a month by a linear interpolation between the Ref CPI applicable to the first day of the month in which the day falls (in the example, January) and the Ref CPI applicable to the first day of the next month (in the example, February). For interpolation purposes, we truncate calculations with regard to the Ref CPI and the Index Ratio for a specific date to six decimal places, and round to five decimal places.Therefore the Ref CPI and the Index Ratio for a particular date will be expressed to five decimal places.(i) The formula for the Ref CPI for a specific date is:
This value truncated to six decimals is 154.633333; rounded to five decimals it is 154.63333.(iv) To calculate the Index Ratio for April 16, 1996, for an inflation-protected security issued on April 15, 1996, the Ref CPIApril 16, 1996 must first be calculated. Using the same values in the equation above except that t=16, the Ref CPIApril 16, 1996 is 154.65000.The Index Ratio for April 16, 1996 is:
Index RatioApril 16, 1996 = 154.65000/154.63333 = 1.000107803. This value truncated to six decimals is 1.000107; rounded to five decimals it is 1.00011.4. Index Contingencies.(i) If a previously reported CPI is revised, we will continue to use the previously reported (unrevised) CPI in calculating the principal value and interest payments.If the CPI is rebased to a different year, we will continue to use the CPI based on the base reference period in effect when the security was first issued, as long as that CPI continues to be published.(ii) We will replace the CPI with an appropriate alternative index if, while an inflation-protected security is outstanding, the applicable CPI is: Discontinued, In the judgment of the Secretary, fundamentally altered in a manner materially adverse to the interests of an investor in the security, or In the judgment of the Secretary, altered by legislation or Executive Order in a manner materially adverse to the interests of an investor in the security.(iii) If we decide to substitute an alternative index we will consult with the Bureau of Labor Statistics or any successor agency. We will then notify the public of the substitute index and how we will apply it. Determinations of the Secretary in this regard will be final.(iv) If the CPI for a particular month is not reported by the last day of the following month, we will announce an index number based on the last available twelve-month change in the CPI. We will base our calculations of our payment obligations that rely on that month's CPI on the index number we announce.(a) For example, if the CPI for month M is not reported timely, the formula for calculating the index number to be used is:
(c) If it is necessary to use these formulas to calculate an index number, we will use that number for all subsequent calculations that rely on the month's index number. We will not replace it with the actual CPI when it is reported, except for use in the above formulas. If it becomes necessary to use the above formulas to derive an index number, we will use the last CPI that has been reported to calculate CPI numbers for months for which the CPI has not been reported timely.5. Computation of Interest for a Regular Half-Year Payment Period. Interest on marketable Treasury inflation-protected securities is payable on a semiannual basis. The regular interest payment period is a full half-year or six calendar months. Examples of half-year periods are January 15 to July 15, and April 15 to October 15. An interest payment will be a fixed percentage of the value of the inflation-adjusted principal, in current dollars, for the date on which it is paid. We will calculate interest payments by multiplying one-half of the specified annual interest rate for the inflation-protected securities by the inflation-adjusted principal for the interest payment date.Specifically, we compute a semiannual interest payment on the basis of one-half of one year's interest regardless of the actual number of days in the half-year.
1. You will have to pay accrued interest on a Treasury bond or note when interest accrues prior to the issue date of the security. Because you receive a full interest payment despite having held the security for only a portion of the interest payment period, you must compensate us through the payment of accrued interest at settlement.2. For a Treasury non-indexed security, if accrued interest covers a fractional portion of a full half-year period, the number of days in the full half-year period and the stated interest rate will determine the daily interest decimal to use in computing the accrued interest. We multiply the decimal by the number of days for which interest has accrued.3. If a reopened bond or note has a long first interest payment period (a “long coupon”), and the dated date for the reopened issue is less than six full months before the first interest payment, the accrued interest will fall into two separate half-year periods. A separate daily interest decimal must be multiplied by the respective number of days in each half-year period during which interest has accrued.4. We round all accrued interest computations to five decimal places for a $1,000 par amount, using normal rounding procedures. We calculate accrued interest for a par amount of securities greater than $1,000 by applying the appropriate multiple to accrued interest payable for a $1,000 par amount, rounded to five decimal places. We calculate accrued interest for a par amount of securities less than $1,000 by applying the appropriate fraction to accrued interest payable for a $1,000 par amount, rounded to five decimal places. 5. For an inflation-protected security, we calculate accrued interest as shown in section III, paragraphs A and B of this appendix.Examples—(1) Treasury Non-indexed Securities—(i) Involving One Half-Year: A note paying interest at a rate of 63/4% , originally issued on May 15, 2000, as a 5-year note with a first interest payment date of November 15, 2000, was reopened as a 4-year 9-month note on August 15, 2000. Interest had accrued for 92 days, from May 15 to August 15. The regular interest period from May 15 to November 15, 2000, covered 184 days. Accordingly, the daily interest decimal, $0.183423913, multiplied by 92, resulted in accrued interest payable of $16.874999996, or $16.87500, for each $1,000 note purchased. If the notes have a par amount of $150,000, then 150 is multiplied by $16.87500, resulting in an amount payable of $2,531.25.(2) Involving Two Half-Years:A 103/4% bond, originally issued on July 2, 1985, as a 20-year 1-month bond, with a first interest payment date of February 15, 1986, was reopened as a 19-year 10-month bond on November 4, 1985. Interest had accrued for 44 days, from July 2 to August 15, 1985, during a 181-day half-year (February 15 to August 15); and for 81 days, from August 15 to November 4, during a 184-day half-year (August 15, 1985, to February 15, 1986). Accordingly, $0.296961326 was multiplied by 44, and $0.292119565 was multiplied by 81, resulting in products of $13.066298344 and $23.661684765 which, added together, resulted in accrued interest payable of $36.727983109, or $36.72798, for each $1,000 bond purchased. If the bonds have a par amount of $11,000, then 11 is multiplied by $36.72798, resulting in an amount payable of $404.00778 ($404.01).6. For a floating rate note, if accrued interest covers a portion of a full quarterly interest payment period, we calculate accrued interest as shown in section IV, paragraphs C and D of this appendix.
C = the regular annual interest per $100, payable semiannually, e.g., 6.125 (the decimal equivalent of a 61/8 % interest rate).
Example: For an 83/4 % 30-year bond issued May 15, 1990, due May 15, 2020, with interest payments on November 15 and May 15, solve for the price per 100 (P) at a yield of 8.84%.
Example:For an 81/2 % 2-year note issued April 2, 1990, due March 31, 1992, with interest payments on September 30 and March 31, solve for the price per 100 (P) at a yield of 8.59%.
Example:For an 81/2 % 5-year 2-month note issued March 1, 1990, due May 15, 1995, with interest payments on November 15 and May 15 (first payment on November 15, 1990), solve for the price per 100 (P) at a yield of 8.53%. Definitions:
Example: For a 91/2 % 10-year note with interest accruing from November 15, 1985, issued November 29, 1985, due November 15, 1995, and interest payments on May 15 and November 15, solve for the price per 100 (P) at a yield of 9.54%. Accrued interest is from November 15 to November 29 (14 days).
Example: A 103/4 % 19-year 9-month bond due August 15, 2005, is issued on July 2, 1985, and reopened on November 4, 1985, with interest payments on February 15 and August 15 (first payment on February 15, 1986), solve for the price per 100 (P) at a yield of 10.47%. Accrued interest is calculated from July 2 to November 4.
Example:For a 101/2 % 8-year note due May 15, 1991, originally issued on May 16, 1983, and reopened on August 15, 1983, with interest payments on November 15 and May 15 (first payment on November 15, 1983), solve for the price per 100 (P) at a yield of 10.53%. Accrued interest is calculated from May 16 to August 15.
Example:For a 93/4 % 6-year 2-month note due December 15, 1994, originally issued on October 15, 1988, and reopened on November 15, 1988, with interest payments on June 15 and December 15 (first payment on June 15, 1989), solve for the price per 100 (P) at a yield of 9.79%. Accrued interest is calculated from October 15 to November 15.
Example:We issued a 10-year inflation-indexed note on January 15, 1999. The note was issued at a discount to yield of 3.898% (real). The note bears a 37/8 % real coupon, payable on July 15 and January 15 of each year. The base CPI index applicable to this note is 164. (We normally derive this number using the interpolative process described in appendix B, section I, paragraph B.) Definitions:
Example:We issued a 35/8 % 10-year inflation-indexed note on January 15, 1998, with interest payments on July 15 and January 15. For a reopening on October 15, 1998, with inflation compensation accruing from January 15, 1998 to October 15, 1998, and accrued interest accruing from July 15, 1998 to October 15, 1998 (92 days), solve for the price per 100 (P) at a real yield, as determined in the reopening auction, of 3.65%. The base index applicable to the issue date of this note is 161.55484 and the reference CPI applicable to October 15, 1998, is 163.29032.
Example:The purpose of this example is to demonstrate how a floating rate note price is derived at the time of original issuance. Additionally, this example depicts the association of the July 31, 2012 issue date and the two-business-day lockout period. For a new two-year floating rate note auctioned on July 25, 2012, and issued on July 31, 2012, with a maturity date of July 31, 2014, and an interest accrual rate on the issue date of 0.215022819% (index rate of 0.095022819% plus a spread of 0.120%), solve for the price per 100 (P). This interest accrual rate is used for each daily interest accrual over the life of the security for the purposes of this example. In a new issuance (not a reopening) of a floating rate note, the discount margin determined at auction will be equal to the spread.
The price is computed as follows:B. For newly issued floating rate notes issued at a premium:
Example:The purpose of this example is to demonstrate how a floating rate note auction can result in a price at a premium given a negative discount margin and spread at auction. For a new two-year floating rate note auctioned on July 25, 2012, and issued on July 31, 2012, with a maturity date of July 31, 2014, solve for the price per 100 (P). In a new issue (not a reopening) of a floating rate note, the discount margin established at auction will be equal to the spread. In this example, the discount margin determined at auction is −0.150%, but the floating rate note is subject to a daily interest rate accrual minimum of 0.000%.
ai = 100 × max(0.00095022819−0.00150,0)/360 = 100 × 0/360 = 0.000000000Ai represents the projected cash flow the floating rate note holder will receive, for a $100 par value, at the future interest payment date Ti, where i = 1,2, . . ., 8. Ti - Ti−1 is the number of days between the future interest payment dates Ti−1 and Ti. To account for the payback of the par value, the variable 1{i=8} takes the value 1 if the payment date is the maturity date, or 0 otherwise. For example:
DEFINITIONS FOR REOPENINGS OF FLOATING RATE NOTES AND CALCULATION OF INTEREST PAYMENTS
Example:The purpose of this example is to determine the floating rate note prices with and without accrued interest at the time of the reopening auction. For a two-year floating rate note that was originally auctioned on July 25, 2012, with an issue date of July 31, 2012, reopened in an auction on August 30, 2012 and issued on August 31, 2012, with a maturity date of July 31, 2014, solve for accrued interest per 100 (AI), the price with accrued interest per 100 (PD) and the price without accrued interest per 100 (PC). Since this is a reopening of an original issue from the prior month, Table 2 as shown in the example is used for accrued interest calculations. In the case of floating rate note reopenings, the spread on the security remains equal to the spread that was established at the original auction of the floating rate notes.
Table 1—13-Week Bill Auction DataAuction dateIssue dateMaturity dateAuctionclearingpriceAuctionhigh rate(percent)Index rate(percent)7/23/20127/26/201210/25/201299.9759860.0950.0950228197/30/20128/2/201211/1/201299.9721940.1100.1100305958/6/20128/9/201211/8/201299.9747220.1000.1000252848/13/20128/16/201211/15/201299.9721940.1100.1100305958/20/20128/23/201211/23/201299.9731670.1050.1050281838/27/20128/30/201211/29/201299.9734580.1050.105027876The following table shows the index rates applicable for the accrued interest.
The price with accrued interest is computed as follows:D. For calculating interest payments:
Example:For calculating interest payments:Example:For a new issue of a two-year floating rate note auctioned on July 25, 2012, and issued on July 31, 2012, with a maturity date of July 31, 2014, and a first interest payment date of October 31, 2012, calculate the quarterly interest payments (IPi) per 100. In a new issuance (not a reopening) of a new floating rate note, the discount margin determined at auction will be equal to the spread. The interest accrual rate used for this floating rate note on the issue date is 0.215022819% (index rate of 0.095022819% plus a spread of 0.120%) and this rate is used for each daily interest accrual over the life of the security for the purposes of this example.Example 1: Projected interest payment as of the original issue date.
Table 4—13-Week Bill Auction DataAuction dateIssue dateMaturity dateAuctionclearing priceAuctionhigh rate(percent)Index rate(percent)7/23/20127/26/201210/25/201299.9759860.0950.0950228197/30/20128/2/201211/1/201299.9721940.1100.1100305958/6/20128/9/201211/8/201299.9747220.1000.1000252848/13/20128/16/201211/15/201299.9721940.1100.1100305958/20/20128/23/201211/23/201299.9731670.1050.1050281838/27/20128/30/201211/29/201299.9734580.1050.105027876The following table shows the index rates applicable for the accrued interest.
Example:The purpose of this example is to demonstrate how a floating rate note can have a price without accrued interest of less than $100 par value when the issue date occurs after the dated date. An original issue two-year floating rate note is auctioned on December 29, 2011, with a dated date of December 31, 2011, an issue date of January 3, 2012, and a maturity date of December 31, 2013.
Table 1—13-WEEK BILL AUCTION DATAAuction dateIssue dateMaturity dateAuctionclearing priceAuction high rateIndex rate12/27/201112/29/20113/29/201299.9936810.025%0.025001580%The following table shows the index rates applicable for the accrued interest.
V. Computation of Adjusted Values and Payment Amounts for Stripped Inflation-Protected Interest Components Note: Valuing an interest component stripped from an inflation-protected 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-protected 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-protected security. Definitions:
c = C/100 = the regular annual interest rate, payable semiannually, e.g., .03625 (the decimal equivalent of a 35/8 % interest rate) Par = par amount of the security to be stripped Ref CPIIssueDate = 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
A 10-year inflation-protected note paying 37/8 % interest was issued on January 15, 1999, with the second interest payment on January 15, 2000. The Ref CPI of January 15, 1999 (Ref CPIIssueDate) was 164.00000, and the Ref CPI on January 15, 2000 (Ref CPIDate) was 168.24516. Calculate the adjusted value and the payment amount at maturity of the interest component.
(2) d = [.04065433 × 1.978021978].
Where: i = investment rate, in decimals.
(3) i = (−.997260274 + 1.038221216) / .497260274.
Editorial Note: At 78 FR 59228-59230, Sept. 26, 2013, appendix B to part 356 was amended; however, portions of the amendment could not be incorporated due to inaccurate amendatory instructions. Appendix C to Part 356—Investment Considerations I. Inflation-Protected Securities A. PRINCIPAL AND INTEREST VARIABILITY
An investment in securities with principal or interest determined by reference to an inflation index involves factors not associated with an investment in a non-indexed security. Such factors include the possibility that: The inflation index may be subject to significant changes, changes in the index may or may not correlate to changes in interest rates generally or with changes in other indices, the resulting interest may be greater or less than that payable on other securities of similar maturities, and in the event of sustained deflation, the amount of the semiannual interest payments, the inflation-adjusted principal of the security, and the value of stripped components will decrease. However, if at maturity the inflation-adjusted principal is less than a security's par amount, we will pay an additional amount so that the additional amount plus the inflation-adjusted principal equals the par amount. Regardless of whether or not we pay such an additional amount, we will always base interest payments on the inflation-adjusted principal as of the interest payment date. If a security has been stripped, we will pay any such additional amount at maturity to holders of principal components only. (See §356.30.) B. TRADING IN THE SECONDARY MARKET
An investment in securities with interest determined by reference to a 13-week Treasury bill index involves risks not associated with an investment in a fixed interest rate security. Such risks include the possibility that: Changes in the index may or may not correlate to changes in interest rates generally or with changes in other indexes; any given interest payment may be more or less than the amount paid on prior interest payment dates; the resulting interest payments may be greater or less than those payable on other securities of similar maturities, and in the event of sustained falling interest rates, the amount of the quarterly interest payments will decrease.