entry Treasury bills, notes, and bonds; sale and issue; uniform offering circular: Marketable securities auction program,
[Federal Register: January 25, 1999 (Volume 64, Number 15)]
[Rules and Regulations]
[Page 3632-3637]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25ja99-5]
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 356
[Department of the Treasury Circular, Public Debt Series No. 1-93]
Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds
AGENCY: Bureau of the Public Debt, Fiscal Service, Department of the Treasury.
ACTION: Final rule.
SUMMARY: The Department of the Treasury (``Treasury'' or ``Department'') is issuing in final form an amendment to 31 CFR Part 356 (Uniform Offering Circular for the Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds). This amendment incorporates certain changes in the Department's marketable securities auction program that have been made over the last several months. The amendment defines the term ``bid-to-cover ratio'' and adds the term to the listing of information that the Department provides in its official auction results announcements. The amendment also updates an example of the proration of auction awards and the sample offering announcements to reflect the change in minimum bid amounts to $1,000 for all marketable
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Treasury securities auctions. The amendment replaces the example of a 3-year note with a 5-year note in the sample highlights of the quarterly financing offering announcement. Further, the amendment makes various revisions to reflect the expansion of uniform or single-price auctions to all marketable Treasury securities. Finally, this amendment makes minor, unrelated technical corrections by restating terms in several equations in Appendix B.
EFFECTIVE DATE: January 25, 1999.
ADDRESSES: This final rule is available for downloading from the Bureau of the Public Debt's Internet site at the following address: www.publicdebt.treas.gov. It is also available for public inspection and copying at the Treasury Department Library, FOIA Collection, Room 5030, Main Treasury Building, 1500 Pennsylvania Avenue, N.W., Washington, D.C., 20220. Persons wishing to visit the library should call (202) 622-0990 for an appointment.
FOR FURTHER INFORMATION CONTACT: Kerry Lanham (Acting Director), Chuck Andreatta or Kurt Eidemiller (Senior Financial Advisors), Department of the Treasury, Bureau of the Public Debt, Government Securities Regulations Staff, (202) 219-3632.
SUPPLEMENTARY INFORMATION: 31 CFR Part 356, also referred to as the uniform offering circular, sets out the terms and conditions for the sale and issuance by the Department of the Treasury to the public of marketable Treasury bills, notes, and bonds. The uniform offering circular, in conjunction with offering announcements, represents a comprehensive statement of those terms and conditions. ‹SUP›1‹/SUP› This final amendment provides for several changes to the uniform offering circular. It adds a definition of the term ``bid-to-cover ratio'' in Sec. 356.2 and revises Sec. 356.23 by incorporating the term in the list of information included in auction results press releases; reflects in Sec. 356.21 and Exhibit A the changes to $1,000 minimum bid amounts for all marketable Treasury securities auctions; replaces in Exhibit A the example of a 3-year note with a 5-year note in the sample highlights of the quarterly financing offering announcement; modifies the definition of ``noncompetitive bid'' in Sec. 356.2 and revises Secs. 356.20 and 356.23 and Exhibit A to reflect the Department's expansion of single-price auctions to all marketable Treasury securities auctions; and makes several minor, unrelated technical corrections in the equations provided in Appendix B.
\1\ The uniform offering circular was published as a final rule on January 5, 1993 (58 FR 412). The circular, as amended, is codified at 31 CFR Part 356.
After the conclusion of a marketable Treasury security auction, the Department makes an official announcement of the auction results through a press release. On June 1, 1998, the Department began providing the ``bid-to-cover ratio'' in all of its auction results press releases. This is the ratio of the total par amount of competitive and noncompetitive bids by the public divided by the total par amount of the securities awarded to the public. The press and some market participants use this figure as an indicator of the bidding interest and, therefore, the ``success'' of the auction.
The number is carried to two decimal places, using normal rounding. For example, if the total amount bid by the public ‹SUP›2‹/SUP› is $24.985561 billion, and the amount awarded to the public is $10.013049 billion, the bid-to-cover ratio is 24.985561/10.013049 = 2.495, or 2.50.
\2\ For the calculation of the bid-to-cover ratio, the amount bid by and awarded to the public excludes any bids or awards for accounts of foreign and international monetary authorities at Federal Reserve Banks or for the account of the Federal Reserve Banks.
By providing the bid-to-cover ratio on the press release, the Department hopes to speed up the dissemination of auction results information to the market. This procedural change, however, should not be viewed as an endorsement by the Department of the bid-to-cover ratio as an analytical method that is superior to other methods for analyzing the results of a marketable Treasury security auction.
Accordingly, Sec. 356.2 of the uniform offering circular is amended by adding the definition of the term ``bid-to-cover ratio.'' In addition, Sec. 356.23 is reformatted and revised by adding the bid-to- cover ratio to the listing of information that the Department provides on the auction results press releases.
This final amendment also revises relevant sections of the uniform offering circular to reflect the Department's decision to reduce the minimum bid amounts (and minimum to hold amounts) to $1,000 for all marketable Treasury securities auctions. All Treasury bills, notes, and bonds are now issued and transferred in increments of $1,000. As announced at the August 1998 quarterly refunding press conference, this reduction in the minimum amounts ``puts Treasury bills and short-term notes within the reach of small investors.'' Prior to this, Treasury bills had minimum bid amounts of $10,000, and Treasury notes with maturities of four years or less required minimum bid amounts of $5,000. Notes with longer maturities and 30-year bonds have for a long time been available in $1,000 minimum purchase amounts. Accordingly, an example describing the Department's proration of certain auction awards in Sec. 356.21 and the highlights of the sample offering announcements listed in Exhibit A are revised to reflect this change.
In addition, the highlights of the sample quarterly financing offering announcement, in Exhibit A, are updated to reflect the Department's decision to issue 5-year notes quarterly, instead of monthly, while discontinuing the issuance of 3-year notes as announced at the quarterly refunding press conference in May 1998.
The Department announced at its November 1998 quarterly refunding press conference on October 28, 1998 that, effective November 2, 1998 all future auctions of marketable Treasury securities will use the uniform or single-price auction method. Previously, Treasury bills and certain Treasury notes and bonds had been auctioned using a multiple- price auction method. As announced at this quarterly refunding press conference, the Department believes ``that using uniform-price auctions will promote improved efficiency in the markets, and will reduce the costs of financing the Federal debt.'' Accordingly, the existing definition of ``noncompetitive bid'' in Sec. 356.2 is revised and respective 356.20 and 356.23 and the sample offering announcements, in Exhibit A, have been modified to reflect this change. The uniform offering circular, however, will continue to define and describe multiple-price auctions as it has historically done, although this method is not currently used. Finally, this amendment also makes several unrelated and minor technical corrections in the equations of Appendix B.
Procedural Requirements
This final rule does not meet the criteria for a ``significant regulatory action'' pursuant to Executive Order 12866. Because this rule relates to public contracts and procedures for United States securities, the notice, public comment, and delayed effective date provisions of the Administrative Procedure Act are inapplicable, pursuant to 5 U.S.C. 553(a)(2). As no notice of proposed rulemaking is required, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601, et seq.) do not apply. There is no new collection of information contained in
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this final rule, and, therefore, the Paperwork Reduction Act does not apply. The collections of information of 31 CFR Part 356 have been previously approved by the Office of Management and Budget under Sec. 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35) under control number 1535-0112. Under this Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number.
List of Subjects in 31 CFR Part 356
Bonds, Federal Reserve System, Government securities, Securities.
Dated: January 12, 1999. Donald V. Hammond, Fiscal Assistant Secretary.
For the reasons set forth in the preamble, 31 CFR Chapter II, Subchapter B, Part 356, is amended as follows:
PART 356--SALE AND ISSUE OF MARKETABLE BOOK-ENTRY TREASURY BILLS, NOTES, AND BONDS (DEPARTMENT OF THE TREASURY CIRCULAR, PUBLIC DEBT SERIES NO. 1-93)
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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.
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Section 356.2 is amended by adding in alphabetical order the definition of ``Bid-to-cover ratio'' and by revising the definition of ``Noncompetitive bid'' to read as follows:
Sec. 356.2 Definitions.
* * * * *
Bid-to-cover ratio means the total par amount of securities bid for by the public divided by the total par amount of securities awarded to the public. The bid-to-cover ratio excludes any bids or awards for accounts of foreign and international monetary authorities at Federal Reserve Banks and for the account of the Federal Reserve Banks. * * * * *
Noncompetitive bid means, for a single-price auction, a bid to purchase securities at the highest yield or discount rate of awards to competitive bidders. For a multiple-price auction, a noncompetitive bid means a bid to purchase securities at the weighted average yield or discount rate of awards to competitive bidders. * * * * *
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Section 356.20 is amended by revising paragraph (b) to read as follows:
Sec. 356.20 Determination of auction awards.
* * * * *
(b) Determining the interest rate for new note and bond issues. The interest rate established as a result of the auction will be set at a 1/8 of one percent increment. For single-price auctions, the interest rate established produces the price closest to, but not above, par when evaluated at the yield awarded to successful competitive bidders. For multiple-price auctions, the interest rate established produces the price closest to, but not above, par when evaluated at the weighted- average yield of awards to successful competitive bidders. * * * * *
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Section 356.21 is amended by revising the last three sentences in paragraph (a) to read as follows:
Sec. 356.21 Proration of awards.
(a) Awards to submitters. * * * For example, Treasury bills may be issued with a minimum to hold of $1,000 and multiples of $1,000. Where an $18,000 bid is accepted at the high discount rate, and the percent awarded at the high discount rate is 88%, the award to that bidder will be $16,000, representing an upward adjustment from $15,840 ($18,000 x .88) to an appropriate multiple to hold. If tenders at the highest accepted discount rate are prorated at, for example, a rate of 4%, the award for a $10,000 bid will be $1,000, instead of $400, in order to meet the minimum to hold for a bill issue. * * * * *
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Section 356.23 is revised to read as follows:
Sec. 356.23 Announcing auction results.
(a) After the conclusion of the auction, the Department will make an official announcement of the auction results through a press release.
(b) The press release will include such information as:
(1) The amounts of bids recognized and accepted;
(2) The range of accepted yields or discount rates;
(3) The proration percentage;
(4) The interest rate for a note or bond;
(5) A breakdown of the amounts of noncompetitive and competitive bids recognized and accepted from the public;
(6) The amounts recognized and accepted from the Federal Reserve Banks for their own account and for foreign and international monetary authorities;
(7) The minimum par amount required to strip a note or bond;
(8) The bid-to-cover ratio; and
(9) other information that the Department may decide to include.
Appendix B to Part 356--[Amended]
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In Appendix B to Part 356, section II, paragraph F is amended by replacing the term v‹INF›n‹/INF› (v with subscript n) throughout the paragraph with the term v‹SUP›n‹/SUP› (v with superscript n or, alternatively, v to the nth power).
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In Appendix B to Part 356, section V, paragraph A is amended by revising the first equation under the resolution to read as follows: * * * * *
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Computation of Purchase Price, Discount Rate, and Investment Rate (Coupon-Equivalent Yield) for Treasury Bills
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Conversion of the discount rate to a purchase price for Treasury bills of all maturities: * * * * *
Resolution:
P=100 [(1--dr)/360] * * * * *
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Exhibit A to Part 356 is amended by revising Sections I through III to read as follows:
Exhibit A to Part 356--Sample Announcements of Treasury Offerings to the Public
* * * * *
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Treasury Quarterly Financing Announcement
For release when authorized at press conference February 5, 20XX Contact: Office of Financing, 202/XXX-XXXX
Treasury February Quarterly Financing
The Treasury will auction $16,000 million of 5-year notes, $12,000 million of 10-year notes, and $10,000 million of 30-year bonds to refund $26,996 million of publicly-held securities maturing February 15, 20XX, and to raise about $11,004 million of new cash.
In addition to the public holdings, Government accounts and Federal Reserve Banks, for their own accounts, hold $1,795 million of the maturing securities, which may be refunded by issuing additional amounts of the new securities.
The maturing securities held by the public include $1,654 million held by Federal Reserve Banks as agents for foreign and international monetary authorities. Amounts bid for these accounts by Federal Reserve Banks will be added to the offering.
All of the auctions being announced today will be conducted in the single-price auction format. All competitive and noncompetitive awards will be at the highest yield of accepted competitive tenders.
The 5-year and 10-year notes and the 30-year bond being offered today are eligible for the STRIPS program.
Tenders will be received at Federal Reserve Banks and Branches and at the Bureau of the Public Debt, Washington, D.C. This offering of Treasury securities is governed by the terms and conditions set forth in the Uniform
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Offering Circular for the Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended). Details about the notes and bond are given in the attached offering highlights.
Attachment
Highlights of Treasury Offerings to the Public [February 20XX Quarterly Financing]
Offering Amount............... $16,000 million. $12,000 million. $10,000 million. Description of Offering:
Term and type of security. 5-year notes.... 10-year notes... 30 year bonds.
Series.................... U-20XX.......... B-20XX.......... Bonds of February 20XX.
CUSIP number.............. 912827XX X...... 912827XX X...... 912810XX X.
Auction date.............. February 11, February 12, February 13, 20XX. 20XX.
20XX.
Issue date................ February 18, February 18, February 18, 20XX. 20XX.
20XX.
Dated date................ February 15, February 15, February 15, 20XX. 20XX.
20XX.
Maturity date............. February 15, February 15, February 15, 20XX. 20XX.
20XX.
Interest rate............. Determined based Determined based Determined based on the highest accepted on the highest on the highest competitive bid. accepted
accepted competitive bid. competitive bid. Yield................... Determined at Determined at Determined at auction. auction.
auction.
Interest payment dates.... August 15 and August 15 and August 15 and February 15. February 15. February 15.
Minimum bid amount and $1,000.......... $1,000.......... $1,000. multiples.
Accrued interest payable Determined at Determined at Determined at auction. by investor.
auction.
auction.
Premium or discount....... Determined at Determined at Determined at auction. auction.
auction. STRIPS Information:
Minimum amount required... Determined at Determined at Determined at auction. auction.
auction.
Corpus CUSIP number....... 912820XX X...... 912820XX X...... 912803XX X.
Due dates and CUSIP
Not applicable.. Not applicable.. February 15, 20XX--912833 XX X. numbers for additional TINTs.
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids...... Accepted in full up to $5,000,000 at the highest accepted yield.
Competitive bids......... (1) Must be expressed as a yield with three decimals in increments of .001%, e.g., 7.123%. (2) Net long position for each bidder must be reported when the sum of the total bid amount, at all yields, and the net long position is $2 billion or greater. (3) Net long position must be determined as of one half-hour prior to the closing time for receipt of competitive tenders. Maximum Recognized Bid at a 35% of public offering. Single Yield. Maximum Award................ 35% of public offering. Receipt of Tenders:
Noncompetitive tenders... Prior to 12:00 noon Eastern Standard time on auction day.
Competitive tenders...... Prior to 1:00 p.m. Eastern Standard time on auction day. Payment Terms................ By charge to a funds account at a Federal Reserve Bank on issue date, or payment of full par amount with tender. Treasury Direct customers can use the Pay Direct feature which authorizes a charge to their account of record at their financial institution on issue date.
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Treasury Weekly Bill Announcement
Embargoed Until 2:30 p.m. April 15, 20XX Contact: Office of Financing, 20/XXX-XXXX
Treasury Offers 13-Week and 26-Week Bills
The Treasury will auction two series of Treasury bills totaling approximately $16,000 million, to refund $13,469 million of publicly held securities maturing November 19, 1998 and to raise about $2,531 million of new cash.
In addition to the public holdings, Federal Reserve Banks for their own accounts hold $7,442 million of the maturing bills, which may be refunded at the highest discount rate of accepted competitive tenders. Amounts issued to these accounts will be in addition to the offering amount.
The maturing bills held by the public include $1,991 million held by Federal Reserve Banks as agents for foreign and international monetary authorities, which may be refunded within the offering amount at the highest discount rate of accepted competitive tenders. Additional amounts may be issued for such accounts if the aggregate amount of new bids exceeds the aggregate amount of maturing bills.
The 13- and 26-week bill auctions will be conducted in the single-price auction format.
Tenders for the bills will be received at Federal Reserve Banks and Branches and at the Bureau of the Public Debt, Washington, D.C. This offering of Treasury securities is governed by the terms and conditions set forth in the Uniform Offering Circular for the Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about each of the new securities are given in the attached offering highlights.
Attachment
Highlights of Treasury Offerings of Bills To be Issued April 24, 20XX
Offering Amount.................. $8,000 million............................... $8,000 million. Description of Offering:
Term and type of security.... 91-day bill.................................. 182-day bill.
CUSIP number................. 912795 XX X.................................. 912795 XX X.
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Auction date................. April 21, 20XX............................... April 21, 20XX.
Issue date................... April 24, 20XX............................... April 24, 20XX.
Maturity date................ July 24, 20XX................................ October 23, 20XX.
Original issue date.......... July 25, 20XX................................ April 24, 20XX.
Currently outstanding........ $31,725 million.............................. ..............................
Minimum bid amount and
$1,000....................................... $1,000 multiples.
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids................................ Accepted in full up to $1,000,000 at the highest discount rate of accepted competitive bids.
Competitive bids................................... (1) Must be expressed as a discount rate with three decimals in increments of .005%, e.g., 7.100%, 7.105%. (2) Net long position for each bidder must be reported when the sum of the total bid amount, at all discount rates, and the net long position is $1 billion or greater. (3) Net long position must be determined as of one half-hour prior to the closing time for receipt of competitive tenders. Maximum Recognized Bid at a Single Yield............... 35% of public offering. Maximum Award:
35% of public offering. Receipt of Tenders:
Noncompetitive tenders............................. Prior to 12:00 noon Eastern Daylight Saving time on auction day
Competitive tenders................................ Prior to 1:00 p.m. Eastern Daylight Saving time on auction day Payment Terms.......................................... By charge to a funds account at a Federal Reserve Bank on issue date, or payment of full par amount with tender. Treasury Direct customers can use the Pay Direct feature which authorizes a charge to their account of record at their financial institution on issue date.
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Treasury Cash Management Bill Announcement
Embargoed until 2:30 p.m. February 25, 20XX Contact: Office of Financing 202/XXX-XXXX
Treasury to Auction Cash Management Bills
The Treasury will auction approximately $23,000 million of 45- day Treasury cash management bills to be issued March 3, 20XX.
Competitive and noncompetitive tenders will be received at all Federal Reserve Banks and Branches. Tenders will not be accepted for bills to be maintained on the book-entry records of the Department of the Treasury (Treasury Direct). Tenders will not be received at the Bureau of the Public Debt, Washington, D.C.
Additional amounts of the bills may be issued to Federal Reserve Banks as agents for foreign and international monetary authorities at the highest discount rate of accepted competitive tenders.
The 45-day cash management bill will be conducted in the single- price auction format. All competitive and noncompetitive awards will be at the highest discount rate of accepted competitive tenders.
This offering of Treasury securities is governed by the terms and conditions set forth in the Uniform Offering Circular for the Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Note: Competitive bids in cash management bill auctions must be expressed as a discount rate with two decimals, e.g., 7.10%.
Details about the new security are given in the attached offering highlights.
Attachment
Highlights of Treasury Offering of 45-Day Cash Management Bill
Offering Amount.............. $23,000 million. Description of Offering:
Term and type of security 45-day Cash Management Bill.
CUSIP number............. 912795 XX X.
Auction date............. February 27, 20XX.
Issue date............... March 3, 20XX.
Maturity date............ April 17, 20XX.
Original issue date...... October 17, 20XX.
Currently outstanding.... $24,724 million.
Minimum bid amount and $1,000. multiples. Submission of Bids:
Noncompetitive bids...... Accepted in full up to $1,000,000 at the highest accepted discount rate.
Competitive bids......... (1) Must be expressed as a discount rate with two decimals in increments of .01%, e.g., 7.12%. (2) Net long position for each bidder must be reported when the sum of the total bid amount, at all discount rates, and the net long position is $1 billion or greater. (3) Net long position must be determined as of one half-hour prior to the closing time for receipt of competitive tenders. Maximum Recognized Bid at a 35% of public offering. Single Yield. Maximum Award................ 35% of public offering.
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Receipt of Tenders:
Noncompetitive tenders... Prior to 11:00 a.m. Eastern Standard time on auction day.
Competitive tenders...... Prior to 11:30 a.m. Eastern Standard time on auction day. Payment Terms................ By charge to a funds account at a Federal Reserve Bank on issue date, or payment of full par amount with tender.
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[FR Doc. 99-1441Filed1-22-99; 8:45 am]
BILLING CODE 4810-39-P
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