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Federal R eserve b a nk O F DALLAS WILLIAM H. WALLACE DALLAS, TEXAS 75222 F IR S T V IC E P R E S ID E N T July 31, 1986 Circular 86-67 TO: The Chief Executive Officer of all depository institutions in the Eleventh Federal Reserve District SUBJECT Treasury announces methodology for collateral security valuations of STRIPS' components DETAILS The Department of the Treasury has announced it will use the "lost bond program" for determining component values of STRIPS (Separate Trading of Registered Interest and Principal of Securities) when they become eligible as collateral for Treasury Tax and Loan Depositories as defined in 31 CFR 203. ATTACHMENTS Attached is the Treasury's press release announcing the methodology for security valuations of STRIPS components. MORE INFORMATION For further information, please contact Tyrone Gholson (214) 651-6263 at the Head Office; Robert W. Schultz (915) 544-4730 at the El Paso Branch; Luke E. Richards (713) 659-4433 at the Houston Branch; or Tony G. Valencia (512) 224-2141 at the San Antonio Branch. Sincerely yours, For additional copies of any circular please contact the Public Affairs Department at (214) 651-6289. Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank (800) 442-7140 (intrastate) and (800) 527-9200 (interstate). This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) TREASURY NEWS D ep artm en t o f th e Treasury • W ashington, D.c. • Telephone 566-2041 FOR IMMEDIATE RELEASE July 1, 1986 TREASURY ANNOUNCES METHODOLOGY FOR COLLATERAL SECURITY VALUATIONS OF STRIPS COMPONENTS The Department of the Treasury announced today the methodology it will use for determining component values of STRIPS (Separate Trading of Registered Interest and Principal of Securities) when they become eligible as collateral for Treasury Tax and Loan Depositaries as defined in 31 CFR 203. The method for determining component values will be Treasury's "lost bond program", which is used to find the present value of a zero-coupon instrument that is consistent with a given par value yield curve. This is the same method used for valuing STRIPS components for broker reporting pur poses in Internal Revenue Service Publication 1212. Prior to the expected early 1987 effective date for eligi bility, Treasury instructions governing collateral security will be amended to provide that STRIPS components with a remaining period to maturity of one year or less will be accepted at par, and that amounts of STRIPS components maturing beyond one year will be taken on the basis of authorized valuation rates issued by Treasury every three months (or more frequently, if needed). The changes that need to be made to the Federal Reserve Banks' automated systems are in progress and are expected to be completed in time for an implementation date early in calendar year 1987. The Department will make a public announcement of the effective date for the availability of STRIPS components as col lateral after the necessary system modifications are completed. Questions about the methodology for the valuation of STRIPS components should be referred to the Bureau of the Public Debt's Office of Financing in Washington, D. C . , (202) 376-4350, or to your local Federal Reserve office. oOo B-644 DEPARTMENT OF THE TREASURY W ASHINGTON June 1986 Collateral Security Valuation Rates for STRIPS Components 5- 31-1987) 3-01- 1987 to (for use from STRIPS Component Payable * Percent 5-15-1987 8-15-1987 11-15-1987 2-15-1988 5-15-1988 8-15-1988 11-15-1988 2-15-1989 5-15-1989 8-15-1989 11-15-1989 2-15-1990 5-15-1990 8-15-1990 11-15-1990 2-15-1991 5-15-1991 8-15-1991 1 1-15-1991 2-15-1992 5-15-1992 8-15-1992 11-15-1992 2-15-1993 5-15-1993 8-15-1993 11-15-1993 2-15-1994 5-15-1994 8-15-1994 11-15-1994 2-15-1995 5-15-1995 8-15-1995 11-15-1995 2-15-1996 5-15-1996 8-15-1996 11-15-1996 2-15-1997 100 100 100 100 91 90 88 86 85 83 81 80 78 76 75 73 72 70 69 68 66 65 64 63 61 60 59 58 57 56 55 53 52 51 50 49 48 48 47 46 STRIPS Component Payable * Percent 5-15-1997 8-15-1997 11-15-1997 2-15-1998 5-15-1998 8-15-1998 11-15-1998 2-15-1999 5-15-1999 8-15-1999 11-15-1999 2-15-2000 5-15-2000 8-15-2000 11-15-2000 2-15-2001 5-15-2001 8-15-2001 11-15-2001 2-15-2002 5-15-2002 8-15-2002 11-15-2002 2-15-2003 5-15-2003 8-15-2003 11-15-2003 2-15-2004 5-15-2004 8-15-2004 11-15-2004 2-15-2005 5-15-2005 8-15-2005 11-15-2005 2-15-2006 5-15-2006 8-15-2006 11-15-2006 2-15-2007 45 44 43 42 41 40 40 39 38 37 37 36 35 34 34 33 32 32 31 30 30 29 29 28 27 27 26 26 25 25 24 24 23 23 22 22 21 21 21 20 STRIPS Component Payable * Percei 5-15-2007 8-15-2007 11-15-2007 2-15-2008 5-15-2008 8-15-2008 11-15-2008 2-15-2009 5-15-2009 8-15-2009 11-15-2009 2-15-2010 5-15-2010 8-15-2010 11-15-2010 2-15-2011 5-15-2011 8-15-2011 11-15-2011 2-15-2012 5-15-2012 8-15-2012 11-15-2012 2-15-2013 5-15-2013 8-15-2013 11-15-2013 2-15-2014 5-15-2014 8-15-2014 11-15-2014 2-15-2015 5-15-2015 8-15-2015 11-15-2015 2-15-2016 5-15-2016 8-15-2016 11-15-2016 2-15-2017 *The percentages provided above are based on a current Treasury yield curve 20 20 19 19 19 18 18 18 18 17 17 17 17 16 16 16 16 16 16 15 15 15 15 15 15 14 14 14 14 14 14 13 13 13 13 13 13 13 12 12
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