[Federal Register Volume 76, Number 40 (Tuesday, March 1, 2011)]
[Rules and Regulations]
[Pages 11079-11080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-4455]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 356
[Docket No. BPD GSRS 11-01; Department of the Treasury Circular, Public
Debt Series No. 1-93]
Sale and Issue of Marketable Book-Entry Treasury Bills, Notes,
and Bonds; Minimum Interest Rate
AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.
ACTION: Final rule.
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SUMMARY: This final rule amends Treasury's marketable securities
auction rules to establish a minimum interest rate of \1/8\ of one
percent for all new Treasury note and bond issues.
DATES: Effective April 1, 2011.
ADDRESSES: This final rule is available on the Bureau of the Public
Debt's Web site at: http://www.treasurydirect.gov. It is also available
for public inspection and copying at the Treasury Department Library,
Room 1428, Main Treasury Building, 1500 Pennsylvania Avenue, NW.,
Washington, DC 20220. To visit the library, call (202) 622-0990 for an
appointment.
FOR FURTHER INFORMATION CONTACT: Lori Santamorena, Chuck Andreatta, or
Kevin Hawkins, Department of the Treasury, Bureau of the Public Debt,
[[Page 11080]]
Government Securities Regulations Staff, (202) 504-3632.
SUPPLEMENTARY INFORMATION: The Department of the Treasury (``Treasury''
or ``We'') is issuing an amendment to 31 CFR 356.20(b) of the Uniform
Offering Circular for the Sale and Issue of Marketable Book-Entry
Treasury Bills, Notes, and Bonds \1\ (``UOC'' or ``Auction Rules'') to
establish a minimum interest rate of \1/8\ of one percent (i.e., 0.125
percent) for all new marketable Treasury note and bond issues. This
amendment is not applicable to reopenings.\2\ In this rule we discuss
how Treasury determines the interest rate for new note and bond issues,
the reason for establishing a minimum interest rate, and the final
amendment to the UOC.
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\1\ See 58 FR 412, January 5, 1993. The circular, as amended, is
codified at 31 CFR part 356. The UOC, together with the offering
announcement for each auction, sets out the terms and conditions for
the sale and issuance by the Treasury to the public of marketable
book-entry Treasury bills, notes, and bonds.
\2\ The term reopening is defined at 31 CFR 356.2 as the auction
of an additional amount of an outstanding security.
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I. Determining the Interest Rate for New Treasury Note and Bond Issues
In determining the interest rate for new note and bond issues,
Treasury sets the interest rate at a \1/8\ of one percent increment.
The interest rate we establish produces the price closest to, but not
above, par that corresponds to the yield awarded to successful
competitive bidders.\3\ The interest rate in turn is used to establish
the amount of the semi-annual interest payment that note and bond
investors receive.\4\
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\3\ For example, the two-year note auction conducted on December
29, 2005, resulted in a yield of 4.404 percent. The interest rate
was set at 4\3/8\ percent with a price of 99.944505. See http://www.treasurydirect.gov/instit/annceresult/press/preanre/2005/ofk1229051.pdf.
\4\ See Appendix B to part 356--Formulas and Tables.
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II. Establishing a Minimum Interest Rate
In an extremely low interest rate environment, a note or bond
auction could result in an interest rate lower than Treasury's \1/8\ of
one percent interest rate increment. If that were to happen, under the
current methodology the new security would be issued with a zero
percent interest rate and would have no semi-annual interest payments.
Treasury is amending the UOC because we believe it is preferable that
Treasury notes and bonds pay regular, semi-annual interest payments.
III. Amendment to the Rule
Accordingly, Treasury is amending paragraph (b) of 31 CFR 356.20 to
state that 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 with the price adjusted accordingly (i.e., at a premium). This
change applies to all new marketable Treasury note and bond issues:
Treasury fixed-principal \5\ (also referred to as nominal) notes and
bonds as well as Treasury inflation-protected notes and bonds.
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\5\ We use the term ``fixed-principal'' to distinguish such
securities from ``inflation-protected'' securities. We refer to
fixed-principal notes and fixed-principal bonds as ``notes'' and
``bonds'' in official Treasury publications, such as auction
announcements and auction results press releases, as well as in the
auction system.
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Procedural Requirements
Executive Order 12866. This final rule is not a ``significant
regulatory action'' pursuant to Executive Order 12866.
Administrative Procedure Act (APA). Because this rule relates to
public contracts and procedures for United States securities, the
notice, public comment, and delayed effective date provisions of the
Administrative Procedure Act are inapplicable, pursuant to 5 U.S.C.
553(a)(2).
Regulatory Flexibility Act. As no notice of proposed rulemaking is
required, the provisions of the Regulatory Flexibility Act (5 U.S.C.
601, et seq.) do not apply.
Paperwork Reduction Act. There is no new collection of information
contained in this final rule, and, therefore, the Paperwork Reduction
Act does not apply. The Office of Management and Budget has approved
the collections of information already contained in 31 CFR part 356,
under control number 1535-0112. Under the Paperwork Reduction Act, an
agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless it displays a valid OMB
control number.
List of Subjects in 31 CFR Part 356
Bonds, Federal Reserve System, Government Securities, Securities.
For the reasons set forth in the preamble, 31 CFR part 356 is
amended as follows:
PART 356--SALE AND ISSUE OF MARKETABLE BOOK-ENTRY TREASURY BILLS,
NOTES, AND BONDS (DEPARTMENT OF THE TREASURY CIRCULAR, PUBLIC DEBT
SERIES NO. 1-93)
0
1. The authority citation for part 356 continues to read as follows:
Authority: 5 U.S.C. 301; 31 U.S.C. 3102, et seq.; 12 U.S.C.
391.
0
2. Section 356.20 is amended by revising the introductory text of
paragraph (b) to read as follows:
Sec. 356.20 How does the Treasury determine auction awards?
* * * * *
(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).
* * * * *
Richard L. Gregg,
Fiscal Assistant Secretary.
[FR Doc. 2011-4455 Filed 2-28-11; 8:45 am]
BILLING CODE 4810-39-P