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Treas.
HJ
10
.A13
P4
v.363
Department of the Treasury
PRESS RELEASES
DEPARTMENT
OF
THE
TREASURY
TREASURY'.) NEW S
•
1789
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
Contact: Darren McKinney
(202) 622-2960
FOR IMMEDIATE RELEASE
November 1, 1996
u.s. AND SOUTH AFRICA INITIAL INCOME TAX TREATY
The Treasury Department today announced that delegations from the United States and
South Africa have reached agreement, subject to review, on an income tax convention.
The text of the Convention was initialed by Trevor van Heerden, South African
Commissioner for Inland Revenue and by Philip West, Deputy International Tax Counsel of the
U.S. Treasury Department. The initialing confirmed the mutual commitment of the two
delegations to move forward as quickly as possible with the required review, followed by
signature and ratification of the Convention. The treaty will enter into force following completion
of the ratification process by both countries.
Acting Assistant Secretary of the Treasury for Tax Policy Donald Lubick hailed the
initialing as an important step in Treasury's goal of expanding the U.S. tax treaty network with
important trading partners.
The text of the new Convention will be made public after signature.
-30-
RR-1354
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
PUBLIC DEBT NEWS
Department of the Treasurv • Bureau of the Public Debt • Washington, DC 20239
FOR JMMEDJA TE RELEASE
November L 1996
Contact: Peter Hollenbach
(202)219-330:
BUREAU OF THE PUBLIC DEBT ANNOUNCES SA VL'iGS BO~l) R.\ TES
FOR NOVEMBER 1996 THROUGH APRIL 1997
The Bureau of the Public Debt announced today the market-based rates for U.S. Sa\'ings Bonds for November 1996
through Apri11997.
SHORT-TERM SAVINGS BOND RATE 4.56%
The 4.56 percent short-term rate is 85 percent of the average of six-month Treasury security yields for August
through October 1996. A new rate is announced each May 1 and November 1. Series EE bonds issued on or after
May 1, 1995. earn the short-term rates for semi-annual interest accrual periods beginning on or after each
announcement date for the first five years.
LONG-TERM SAVINGS BOND RATE 5.53%
The 5.53 percent long-term rate is 85 percent of the average of five-year Treasury security yields for May 1996
through October 1996. Series EE bonds issued on or after May 1, 1995, earn long-term rates from five years
through 17 years. The long-term rate in this announcement is provided only for reference.
SERIES E AND EE SAVINGS BONDS ISSUED BEFORE !vIA Y 1995
Series E and EE bonds as well as Savings Notes issued before May 1995, held five years and longer, continue to
earn 85 percent of the average five-year Treasury securities yields during the holding period or a guaranteed
minimum yield whichever produces the higher value. See table on the back for EE bond yields.
SERIES HAND HH BOND RATE 4.00%
Series Hand HH bonds issued or entering an extended maturity period Since Jvlarch 1. 1993, pay interest
semiannually at a fixed rate of 4 percent per annum.
MATURED SERIES E SAVINGS BONDS
Series E savings bonds continue to reach final maturity and stop earning interest. Bonds issued between May 1941
and October 1956. along with those issued between December 1965 and October 1966 have stopped earning
interest. Bonds with issues dates shown here will reach final maturity in the next six months.
Bond Issue Dates
Bonds Stop Earning Interest
November 1956 through May 1957
November 1966 through May 1967
November 1996 through May 1997
November 1996 through May 1997
The latest United States Savings Bonds/Hates Earnings Report and other useful information about savings bonds is
available at Public Debt"s Internet Home Page (HTTP://wwv..ustreas.gov/treasur:'bureaus'pubdebt). The table on
the back of this bulletin shows actual yields for Series EE bonds.
000
PA-238
RR-1355
REDEMPTION VALUES AND YIELDS FOR
$100 SERIES EE BONDS -- NOVEMBER 1996 THROUGH OCTOBER 1997
This table shows semiannual redemption values for 5100 Series EE Bonds· Values for other denominations are proportional
to the values shown For example, the value of a $50 bond is one-half the amount shown and the value of a $500 bond is
five times the amount shown The Earnings column shows the annual yield that the bonds will earn during the period indicated
The Yield From Issue Date is the bond's yield from its issue date to the date shown or date adjusted as shown in the footnotes
Additional information may be obtained from the Bureau of the Public Debt, 200 Third Street, Parkersburg, VW 26106-1328.
Series EE Bond
Issue Dates
Value as of
Date·· Amount
11/96 thru 4/97
11/1/96
5/96 thru 10/96
11/95 thru 4/96
11/1/96
5/95 thru 10/95
11/94 thru 4/95
5/94 thru 10/94
11/1/96
11/93 thru 4/94
11/1/96
5/93 thru 10/93
3/93 thru 4/93
11/1/96
11/92 thru 2/93
5/92 thru 10/92
11/91 thru 4/92
11/1/96
11/1/96
5/91 thru 10/91
11/90 thru 4/91
5/90 thru 10/90
11/89 thru 4/90
5/89 thru 10/89
11/88 thru 4/89
5/88 thru
11/87thru
5/87 thru
11/86 thru
5/86 thru
11/85 thru
5/85 thru
11/84 thru
5/84 thru
11/83 thru
5/83 thru
3/83 thru
11/82 thru
5/82 thru
11/81 thru
5/81 thru
11/1/96
11/1/96
11/1/96
3/1/97
1111/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
10/88
4188
11/1/96
11/1/96
10/87
4/87
11/1/96
11/1/96
10/86
4/86
11/1/96
10/85
4/85
11/1/96
11/1/96
10/84
4/84
11/1/96
11/1/96
11/1/96
10/83
4/83
2/83
10/82
4/82
10/81
11/80 thru 4/81
5/80 thru 10/80
1/80 thru 4/80
11/1/96
3/1/97
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
1/1/97
Semiannual Earnings
Period begins·· yield· ....
50.00
51.08
11/1/96
11/1/96
52.32
53.68
54.16
55.24
11/1/96
56.32
57.44
11/1/96
58.60
62.12
64.56
67.20
69.24
71.32
73.44
75.64
77.92
80.24
82.68
85.16
87.68
90.32
106.56
108.68
110.84
113.08
115.32
119.44
124.64
131.56
132.32
148.52
152.96
157.56
166.24
179.64
183.20
3/1/97
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
11/1/96
3/1/97
11/1/96
11/1'/96
11/1/96
11/1/96
11/1/96
11/1/96
1/1/97
Value and Yield From Issue Date
Date·*
Yield
Amount
4.64%
4.54%
4.59%
4.62%
3.99%
3.91%
5/1/97
3.98%
404%
5/1/97
5/1197
3.96%
7.86%
8.18%
6.07%
6.01%
5.95%
5.99%
6.03%
5.95%
6.08%
6.00%
5.92%
6.02%
6.02%
3.98%
3.97%
4.04%
3.96%
4.02%
5.43%
5.46%
5.29%
5.99%
5.98%
6.01%
9/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5.99%
5.97%
6.01%
5/1/97
5/1/97
5/1/97
9/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5/1/97
5.98%
7/1/97
51.16
52.24
53.52
54.92
55.24
56.32
57.44
58.60
59.76
64.56
67.20
69.24
71.32
73.44
75.64
77.92
80.24
82.68
85.16
87.68
90.32
93.04
108.68
110.84
113.08
115.32
117.64
122.68
128.04
135.04
136.28
4.64%
4.43%
4.59%
4.75%
4.03%
4.01%
4.00%
4.01%
4.00%
5.76%
6.00%
6.01%
6.01%
6.00%
6.00%
6.00%
6.00%
6.01%
6.01%
6.00%
6.00%
6.00%
7.18%
7.04%
6.92%
6.80%
6.69%
6.76%
6.83%
6.97%
7.04%
152.96
157.56
7.60%
7.54%
162.28
171.20
185.04
7.50%
7.60%
188.68
7.73%
7.85%
• Monthly increases in value, applicable to some bonds issued prior to May 1995, are not shown in the table .
•• The dates shown are for the first issue date of the range in the first column. Add one month for each later issue month. For
example. a bond issued in 01/96 (two months after the first date in the range) would be worth the amount shown two months
after the date listed. The six-month earning period would begin two months later than the date shown .
••• Yields and savings bond rates may not agree due to rounding and due to the methodology for computing market-based yields
for bonds Issued prior to May 1, 1995.
From: TREASURY PUBLIC AFFAIRS
DEI' .\
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I 'I E l\ ' I
()...
TilL
12-5-95 3:41pm
T
I~
F \ S I'
p. 8 of 20
I{ \"
NEWS
TREASURY
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C.. 20220 - (202) 622-2960
Monthly Report
by the
Secretary of the Treasury
Pursuant to the
Mexican Debt Disclosure Act
of 1995
Contents
Page 1
i.
Overview
n.
Current Condition of Mexico's Economy
3
m.
Mexico's Financial Transactions
7
IV.
Disbursements, Swapst Guarantees and Compensation
to the U.S. Treasury
8
V.
Status of the Oil Facility
8
October 1996
For press releJl$es, speec1w, public schedJlles and official biographies, call our 24-hour fax line at (202) 622-2040
..
Treasury Secretary IS Repon to Congress
October 1996
1.
Overview
In providing assistance to Mexico under the February 21, 1995 Agreements, the U.S.
government acted to protect vital U.S. interests: American exports and jobs, the
security of our common border, and the stability of other emerging market economies.
U.S. and other international support in 1995 has allowed Mexico to implement the
policies necessary to avert defau1t~ regain access to international capital markets, and
restore the basis for sustainable growth.
The Mexican economy is rebounding from the deep recession of 1995. Second-quarter
1996 GDP grew 7.2 % compared to a year earlier, and recent economic indicators point
to continued growth in the third quarter. In an October survey by Qmsensus
EcOMmieS, private analysts forecast 1996 real GDP growth at 4.1 %, compared to 2%
at the beginning of this year. Fueled by the resumption of Mexican growth, U.S.
exports to Mexico are running at record levels this year.
Monetary and fiscal policy continue to be solid. First-half 1996 fiscal results were
within government targets, and growth of monetary aggregates also remains well within
the Bank4f Mexico's targets. Restrained money growth has helped Mexico to achieve
a path of steady disinflation, as seen by the September monthly inflation rate of 1.6%.
On October 26, the Mexican government, the Bank of Mexico, and labor and business
representatives signed the annual "Alliance for Economic Growth", also known as the
PACTa, which sets out 1997 economic targets. The PAcrO calls for the maintenance
of finn fiscal and monetary policies, an increase in the minimum wage in line with
projected inflation, and the continuation of a floating exchange rate. Key targets
incbde 15 % inflation, 4 % real GDP growth, a budget deficit of 0.5 % of GDP, a
current account deficit of less than 2 % of GDP, and a 17 % increase in the minimum
wage.
The peso came under pressure in October, falling 5.3% through October 31, from p7.54
per dollar to p7.96 per dollar, a 3.5% drop from its end-1995 level. The Bank of Mexico
tightened monetary policy modestly in mid-October to help prevent undue exchange rate
volatility. Interest rates on the benchmark 28-day cetes rose to 29.3% in the October 29
auction, more than six percentage points above their early October, post-crisis lows of
about 22.7%. One-year interest rates rose less than two percentage points to 28.6%, as
the yield curve flattened.
In other October financial market developments, Brady Par bond stripped spreads widened .
by 49 basis points during the month to-October 29, after reaching a post-crisis low on
October 4 of 475 basis points over Treasuries. Mexican equity prices fell 0.7% through
From: TREASURY PUBLIC AFFAIRS
12-5-96 3:43pm
p. 10 of 29
Treasury Secretary's Report to Congress
October 1996
October 31. The Mexican government and its agencies continued to attract international
capital in October, and have now raised over $15 billion in 1996 to date.
Banking system restructuring continues. On October 24, Spain's Banco Santander
announced that it will acquire a 75 % stake in Grupo Financiero Invermexico, which
owns the fifth largest bank in Mexico, Banco Mexicano. This marks the fourth recent
purchase of a Mexican bank by a foreign investor.
On October 13, the government of Mexico announced that it would scale back its plans
for petrochemical privatization, reserving S1 % of shares for the government and selling
49% to the private sector. The government also announced it would fully open new
petrochemical investment to private investors, both domestic and foreign.
Mexico has met all payment obligations to date under the U.S. financial support
program. Including the August prepayment of $7 billion, Mexico has repaid a net $9
billion in outstanding short- and medium-term swaps to the Treasury and Federal
Reserve. Thus, Mexico has repaid nearly three-quarters of its debt to the U.S., well
ahead of schedule. It has also made interest payments totaling $1.36 billion, including
a $68 million payment on September 30.
Mexico's $3.5 billion in remaining obligations to the U.S. under the February 21, 1995
Agreements continue to be fully backed by proceeds from Mexico's crude oil, oil
products, and petrochemical product exports. Payments for these exports flow through
a special account at the Federal Reserve Bank of New York. As of October 21, $13.9
billion had passed through this account.
2
From: TREASURY PUBLIC AFFAIRS
12-5-96 3:44pm
p. 11 of 29
Treasury Secretary IS Repon to Congress
October 1996
II.
Current Condition of Mexico's Economy
a.
Economic Acijustment
Recent data suggest that t1u recowery continued in the third quarter 0/1996, and that
the extemal sector remains strong
Economic indicators showed continued strength in August and September, following
the 7.2% year~ver-year (y/y) GDP growth in the second quarter of 1996.
•
In the first eight months of the year, industrial production rose 9.2% compared to
the first eight months of 1995 and 1% compared to the same period in 1994.
Construction output in August was at its highest level since December
1994. It rose 20% during the June through August period compared to
the previous three-month period.
•
Domestic vehicle sales in September rose 22 % compared to August. For the
first nine months of 1996, domestic vehicle sales were almost double their level
for the same perioc;l in 1995, but remained significantly below 1994 levels.
Mexico's trade balance registered a $601 million surplus. in September (preliminary).
For the first nine months of 1996, the trade surplus was $4.5 billion, $100 million
more than the first nine months of 1995.
•
During the first nine months of 1996, exports and imports rose 19% and
20.2 %, respectively, over the same period in 1995.
•
U.S. exports to Mexico rose to a record high in the first eight months of 1996,
increasing by 19.7%, compared to the same period in 1995, and 9% over the
same period in 1994.
Labor markets remain
steady
•
The number of workers permanently registered in the social security system
(IMSS), a measure of employment in the formal economy, rose in August by
6.9% from a year earlier, and by 0.7% compared to July.
•
The open unemployment rate, a narrow rate of joblessness in the urban formal
sector, rose to 5.5% in September from"5.3% in August. The uptiek reflected
3
From: TREASURY PUBLIC AFFAIRS
12-5-96 3:45pm
p. 12 of 20
Treasury Secretary IS Report to Congress
October 1996
seasonal influences. The open unemployment rate is down from September
1995, when it was 7.3%.
ll.
b.
~lonetary
Monetary and Fiscal Policy
aggregates indicate policy remains on track
•
Since January 1 of this year, base money has fallen about 9.2 %, to p60.6
billidn. Although this decline is seasonal, at the end of September base money
was substantially below the Bank of Mexico's target for the third quarter. Over
twelve months ending in September, base money fell slightly in real terms.
•
In 1996, net domestic credit (NDA) has faIlen by p37 billion while net
international reserves have increased by $3.9 billion.
In mid-October, the BOM announced a modest tightening of monetary policy, and
money market interest rates moved higher.
Mexico maintained a finn fiscal stance in the first half 0/ 1996
•
The budget registered a surplus in the fIrSt half of 1996, aided by higher-tbanprojected oil prices, which boosted revenues, and lower-than-projected interest
rates, which reduced expenditures.
Inflation continues to recede
•
Monthly inflation registered 1.6% in September, an uptick from the August rate
of 1.3% that had been expected for seasonal reasons. Inflation for the fust half
of October was 0.7%.
"Mexico recif/irms commitment to macroeconomic discipline
On October 26, the Mexican government, the Bank of Mexico, and labor and business
representatives signed the annual" Alliance for Economic Growth ", also known as the
PACTO, which sets out 1997 economic targets. The PACTO calls for the maintenance
of flI111 fiscal and monetary policies, an increase in the minimum wage in line with
projected inflation, and the continuation of a floating exchange rate. Key targets
include 15 % inflation, 4 % real GDP growth, a budget deficit of 0.5 % of GDP, a
4
From: TREASURY PUBLIC AFFAIRS
12-5-96 3:45pm
p. 13 of 20
Treasury Secretary 's Repon to Congress
October 1996
current account deficit of less than 2 % of GDP, and a 17 % increase in the minimum
wage.
n.
c.
Financial Sector and Other Structural Developments
Restructuring continues in the banking system
•
On October 24, Spain's Banco Santander announced that it will acquire a 75%
stake in Grupo Financiero Invermexico, which owns the fifth largest bank in
Mexico, Banco Mexicano. This marks the fourth recent purchase of a Mexican
bank by a foreign investor.
The transaction will inject $425 million in new capital into Banco
Mexicano, which will also sell ij,bout $2.4 billion in overdue loans to
FOBAPROA, the central bank's insurance fund.
•
On September 30, as scheduled, the GOM ended the small debtor relief
program (ADE). Loans that had benefitted from reduced interest rates under the
ADE program are now subject to market interest rates.
Non-per/arming loans decline sUghtly, but remain high
•
The level of non-performing l~s for the entire private banking system
(including those of the intervened banks but excluding loans sold to FOBAPROA,
the central bank's insurance fund) fell to 12.7% on August 31 from 13.3% on
July 31.
Mexico announces new program for petrochemicals
On October 13, the government of Mexico announced that it would scale back its plans
for petrochemical privatization, reserving 51 % of shares for the government and selling
49 % to the private sector. It also announced it would fully open new petrochemical
investment to private investors, both domestic and foreign.
•
The government of Mexico submitted legislation to Congress intended to
provide greater legal clarity for private investors in the petrochemicals sector.
Both houses approved the legislation by October 29.
5
From: TREASURY PUBLIC AFFAIRS
12-12-95
4:44pm
p. 7 of 11
Treusury Secretary's Repon to Congress
()ctober 1996
II.
d.
Financial Markets
Tht' peso depreciated, interest rates rose
The peso came under pressure in October, falling 5.3 % through October 31,
closing at p7.96 to the dollar, from its September 30 close of p7.54.
After falling about 1 % through October 29, the real (inflation-adjusted)
exchange rate was about 18.3% above its end-1995 level. The peso is
still about 20.5% below its pre-devaluation (November 1994) level in
real terms.
The October 29 primary auction resulted in 28-day cetes yields of 29.34% (on
an annnalized basis), up from 23.28% at the September 24 auction. One-year
rates were at 28.63 % at the October 29 primary auction, slightly up from
28.03 % at the September 24 auction.
Rates on Udibonos (3-year maturity) dropped from 8.21 % on September
17 to 7.70 % on October 29. (Those bonds yield a "real" rate, in that
their principal is indexed to Mexican inflation.)
financial asset prices were down
•
As of October 31, Mexico's stock market fell 0.7% in peso terms since the end
of September, but is up 122% over the February 1995 low, and up 38% from
pre-crisis levels. In dollar terms, the Bolsa index is still down 40 % from precrisis levels, but up 98% from its March 1995 low.
The Mexican Brady Par Bond yield spread over U.S. Treasuries, adjusted to
remove the effect of partial collateralization, rose from 5.10% on September 30
to 5.59% on October 29. This is about 14 percentage points below the 19.37%
spread reached in March 1995.
Mexico's 30-year uncollaterized dollar global bond, which was priced to yield a
spread of 552 basis points (bps) over U.S. Treasuries on April 30, was trading
in the secondary market on October 29 at 491 bps over comparable U.S.
Treasuries, compared with a spread of 458 bps on September 30.
6
From: TREASURY PUBLIC AFFAIRS
12-12-95
4:45pm
p. 8 of 11
1reasury Secretary's Repon to Congress
October 1996
.Uexico continues to attract international capital
The Mexican government and its agencies have raised over $15 billion in the
international capital markets in 1996 to date.
•
On October 7, Mexico increased its eight-year DMI billion Eurobond issue,
launched in August, by DMSOO million (approximately $327 million). For the
first five years, the bonds pay an interest rate of 8.125 %, and then the yield
rises to 10.875% until maturity.
Pemex, the state ruti oil company, announced on October 8 that it will sell $300
million in three-year Eurobonds. The bonds carry a coupon of 7.75 %, and are
priced to yield 175 bps over U.S. Treasuries.
ll.
e.
International Reserves
Net international reserves (BOM definition) were $15.8 billion on October 25, up
slightly from their level at the end of September, and roughly unchanged from their
cnd- 1995 level.
•
Reserves (BOM definition) continue to exceed three months of non-maquiladora
imports -- despite strong import growth this year.
Net International Reserves (IMP defmition) were $3.9 billion on October 25,
roughly unchanged from end-September. (The IMF defmition of reserves
excludes amounts owed to the IMF.)
III.
Mexico's Financial Transactions
In accordance with the February 21, 1995 Agreements, Mexico requested, and.
Treasury authorized, funds disbursed under the program to be used to redeem
resobonos and other short-term, dollar-denominated debt of the Mexican government
and its agencies. All funds have been used to redeem tesobonos, which are now fully
renred.
7
From: TREASURY PUBLIC AFFAIRS
12-5-95
3:47pm
p. 15 of 20
Treasury Secretary's Repon to Congress
October 1996
IV.
DIsbursements, Swaps, Guarantees and Compensation to the U.S. Treasury
Followin& Mexico's $7 billion prepayment to the U.S. Treasury on August 5, $3.5
billion remains outstanding as of September 30, all in the form of medium-term swaps.
•
A total of $13.5 billion in U.S. funds have been disbursed to Mexico under the
support program: $3 billion in short,term swaps and $10.5 billion in mediumterm swaps. (Swap arrangements are described in the June 1996 Semi-annual
Report.) Of this total, no more than $12.5 billion has been outstanding at any
one time. The United States has not extended any securities guarantees to
Mexico under the support program.
Mexico has not missed any interest payments or required principal repayments under
any of the swaps.
•
To date, the United States has received $1.36 billion in interest payments from
Mexico, including $68 million in interest on medium-term swaps paid to the
ESF on September 30.
•
The. period during which disbursements could be made under the February 21,
1995 agreements ended on August 21, 1996. The last disbursement under the
program was made on July 5, 1995.
v.
Status of the on Facility
The payment mechanism, established under the Oil Proceeds Facility Agreement,
continues to function smoothly. This has been confirmed by independent reviews (in
August 1995, February 1996, and August 1996).
•
In each review, Petroleos'Mexicanos' (PEMEX) independent public auditors,
Coopers & .Lybrand, analyzed the information utilized for the previous two
quarterly export reports prepared by PEMBX and provided to the U. S. Treasury
pursuant to the Oil Proceeds Facility Agreement.
•
According to the reviews, the quarterly reports "fairly presentII information
related to both PEMEX' s oil exports and the collection of proceeds from soch
exports. The next semi-annual review is expected in February 1997.
8
=
Am ort:il.atDn Sc:bedu1:! ofESF and Fedeml.Resezve Swaps wih M exix>
N
.....o
CD
n. --u:l1ts1Ddate InHl~"'~
D.
VS.M:ilbsl
E
TotalDEb ns:«I
D.
ao
..".
......
I
tIl
I
5W
0
0
0
0
0
0
JI
.:l.J8(}96
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1
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DEPARTMENT
OF
THE
TREASURY
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASHINGTON, D.C .• 20220. (202) 622-2960
BMBARGOED UNTIL 2: 30 P. M.
November ~, ~996
CONTACT:
Office of Financing
202/219-3350
TREASURY'S 52-WEEK BILL OFFERING
The Treasury will auction approximately S~9/2S0 million
of 52-week Treasury bills to be issued November l4, 1996. This
offering will provide about $375 million of new cash for the
Treasury, as the maturing 52-week bill is currently outstanding
in the amount of $18,870 million. In addition to the maturing
52-week bills, there are $26,333 million of maturing 13-week and
26-week bills.
Federal Reserve Banks hold $12,055 million of bills for
their own accounts in the maturing issues. These may be refunded
at the weighted average discount rate of accepted competitive
tenders.
Federal Reserve Banks hold $4,998 million of the maturing
issues as agents for foreign and international monetary authorities. These may be refunded within the offering amount at the
weighted average 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 '. For purposes of determining such additional
amounts, foreign and international monetary authorities are
considered to hold none of the maturing 52-week issue.
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 (31 CFR Part 356) for the sale and issue by
the Tren~lJr.y to the public of marketable Treasury bills, notes,
and bonds.
Details about the new security are given in the attached
offering highlights_
000
Attachment
RR-13S7
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
HIGHLIGHTS OF TREASURY OFFDDfG OF S2 -WEEK BILLS
TO BB XSSUED NOVEMBER 146 1996
November 1, 1996
Offering Amount . . . . .
$19,250 million
Description of Offering:
Term and type of security
CUSIP number
. . .
Auction date
. . .
Issue date .
. . .
Maturity date . . . . .
Original issue date
Maturing amount . . .
Minimum bid amount
Multiples . . . . .
364-day bill
912794 2W 3
November 7, 1996
November 14, 1996
November 13, 1997
November 14, 1996
$18,870 million
Subm1ssion of Bids:
Noncompetitive bids
Competitive bids
Accepted in full up to $1,000,000
at the average discount rate of
accepted competitive bids
Must be expressed as a discount rate
with two decimals, e.g., 7.10t
(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
$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.
( 1)
Maximum Recognized Bid
at a Single Yield
Maximum
A1IIard . . .
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders
Pa~ent
$10,000
$1,000
Term. . . . . . . .
35% of public offering
35\ of public offerirg
Prior to 11:00 a.m. Eastern Standard
time on auction day
Prior to 11:30 a.m. Eastern Standard
time on auction day
Full payment with tender or by charge
to a funds account at a Federal
Reserve hank on issue date
UBLIC DEBT NEWS
Department of the Treasury •
Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
November 4, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $14,142 million of 13-week bills to be issued
November 7, 1996 and to mature February 6, 1997 were
accepted today (CUSIP: 9127942L7).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.03%"
5.04%"
5.04%"
Investment
Rate
5.16%"
5.18%"
5.18%-
Price
98.729
98.726
98.726
Tenders at the high discount rate were allotted 47%".
The investment rate lS the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
Received
$58, ;'94,371
Acce}2ted
$14,142,297
$53,189,191
1,510,653
$54,699,844
$8,336,617
1,510,653
$9,847,270
3,748,010
3,748,010
547,017
$58,994,871
547,017
$14,142,297
An additional $45,483 thousand of bills will be
issued to foreign official institutions for new cash.
RR-1358
UBLIC DEBT NEWS
Department of the Treasury •
Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
November 4, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $14,055 million of 26-week bills to be issued
November 7, 1996 and to mature May 8, 1997 were
accepted today (CUSIP: 9127944H4).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.06%'
5.08%'
5.08%-
Investment
Rate
5.26%'
5.29%'
5.29%-
Price
97.442
97.432
97.432
Tenders at the high discount rate were allotted 93%'.
The investment rate lS the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
Received
$55,430,595
Accepted
$14,054,585
$47,907,610
1,242,402
$49,150,012
$6,531,600
1.242,402
$7,774,002
3,700,000
3,700,000
2,580,583
$55,430,595
2,580,583
$14,054,585
An additional $214,117 thousand of bills will be
issued to foreign official institutions for new cash.
5.07
RR-1359
97.437
UBLIC DEBT NEWS
Dcpartmcnt of the Treasury • Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
November 5, 1996
RESULTS OF TREASURY'S AUCTION OF 3-YEAR NOTES
Tenders for $18,501 million of 3-year notes, Series Z-1999,
to be issued November 15, 1996 and to mature November 15, 1999
were accepted today (CUSIP: 912827Z96)
The interest rate on the notes will be 5 7/8t. The range
of accepted bids and corresponding prices are as follows:
Low
High
Average
Yield
5.872%'
5.889%"
5.879t
Price
100.008
99.962
99.989
Tenders at the high yield were allotted 10%".
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Received
$42,194,660
Accepted
$18,501,060
The $18,501 million of accepted tenders includes $564
million of noncompetitive tenders and $17,937 million of
competitive tenders from the public.
In addition, $1,635 million of tenders was awarded at the
average price to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $2,716 million
of tenders was also accepted at the average price from Federal
Reserve Banks for their own account in exchange for maturing
securities.
RR-1360
() EPA R T 1'1 E N T
0 F
THE
T REA SUR Y
1789
1500 PENNSYLVANIA AVENUE, N.W. • WASHINGTON, D.C. • 20220· (202) 622-2960
CONTACT:
EMBARGOED UNTIL 2: 30 P. M.
November S, 1996
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $28,000 million, to be issued November 14,
1996. This offering ~ill provide about $1,675 million of new
cash for the Treasury, as the maturing 13-week and 26-week bills
are outstanding in the amount of $26,333 million. In addition to
the maturing 13-week and 26-week bills, there are $18,870 million
of maturing 52-week bills. The disposition of this latter amount
was announced last week.
Federal Reserve Banks hold $12,055 million of bills for
their own accounts in the three maturing issues. These may be
refunded at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $4,654 million of the three
maturing issues as agents for foreign and international monetary
authorities. These may be refunded within the offering amount
at the weighted average 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. For purposes of determining such additional
amounts, foreign and international monetary authorities are
considered to hold the entire $4,654 million of the original 13week and 26-week issues.
Tenders for the' bills will be received at Federal Reserve
Banks and Branches and at the Bureau of the Public Debt,
Wa&hington, D. C. This offering of Treasury securities is
governed by ~he terms and conditions set forth in the Uniform
offering Circular (11 CFR Part 356) for the sale and issue by the
Treasury to the public of marketable Treasury bills, notes, and
bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
RR-1361
B~GBL~GBTS
OP TRBASURY
O~~BR~NQS
OF WBEKLY
B~LLS
TO BE ISSUED NOVBMBBR 1., 1996
N
~
!L
November 5, 1996
OCtering amount . . . . .
pescription ot Off.ring.
Term and type of security
CUSIP number
. . . .
Auctton date
. . .
Issue date
. . . .
Maturity date . . .
Original issue date .
CUrrently outstanding
Minimum bid amount
. . .
Multiples . . . . . . . .
.
.
.
.
.
.
$14,000 million
$14,000 million
91-day bill
912794 3Y 8
November 12, 1996
November 14, 1996
Pebruary 13, 1997
August 15, 1996
$12,549 million
$10,000
$ 1,000
182-day bill
912794 4J 0
November 12, 1996
November 14, 1996
May 15, 1997
November 14, 1996
$10,000
$ 1,000
The following rulps apply to all securities mentioned above.
U
Submission of Bids:
Noncompetitive bids
Ct:
Competitive bids
~
o
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(I) Must be expressed as a discount rate with
two decimals, e.g., 7.10%.
(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 $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.
W
J
lI~
J
W)
,
&
II
pf
111
.
j
Maximum Recognized Bid
at a Single Yield
Maximum Award .
.
.
.
35% of public offering
.
.
Receipt of Tenders:
Noncompetitive tenders
ID
t
Competitive tenders
If)
I
>
Payment Terme .
'?
35% of public offering
Prior to 12:00 noon Eastern Rtandard time
on auction day
Prior to 1:00 p.m. Eastern Standard time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
f
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
---
FOR IMMEDIATE RELEASE
November 6, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 9-YEAR, 11-MONTH NOTES
Tenders for $10,002 million of 9-year, 11-month notes,
Series D-2006, to be issued November 15, 1996 and to mature
October 15, 2006 were accepted today (CUSIP: 912827Z62).
The interest rate on the notes will be 6 1/2~. The range
of accepted bids and corresponding price~ are as follows:
Low
High
Average
Yield
6.260%'
6.283%'
6.273~
Price
101.739
101.570
101.643
Tenders at the high yield were allotted 46%".
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Received
$24,061,165
Accepted
$10,001,825
The $10,002 million of accepted tenders includes $306
million of noncompetitive tenders and $9,696 million of
competitive tenders from the pUblic.
In addition, $1,470 million of tenders was also accepted
at the average price from Federal Reserve Banks for their own
account in exchange for maturing securities.
The minimum par amount required for STRIPS is $400,000.
Larger amounts must be in multiples of that amount.
Also, accrued interest of $5.53571 per $1,000 of par must
be paid for the period October 15, 1996 to November 15, 1996.
RR-1362
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR RELEASE AT 3:00 PM
November 6, 1996
Contact: Peter Hollenbach
(202) 219-3302
PUBLIC DEBT ANNOUNCES ACTIVITYFOR
SECURITIES IN THE STRIPS PROGRAM FOR OCTOBER 1996
Treasury's Bureau of the Public Debt announced activity figures for the month of October
1996, of securities within the Separate Trading of Registered Interest and Principal of
Securities program (STRIPS).
Dollar Amounts in Thousands
Principal Outstanding
(Eligible Securities)
$925,429,824
Held in Unstripped Fonn
$698,207,518
Held in Stripped Fonn
$227,222,306
Reconstituted in October
$12,048,644
The accompanying table gives a breakdown of STRIPS activity by individual loan description.
The balances in this table are subject to audit and subsequent revision. These monthly figures
are included in Table VI of the Monthly Statement of the Public Debt, entitled "Holdings of
Treasury Securities in Stripped Fonn."
Infonnation about "Holdings of Treasury Securities in Stripped Fonn" is now available on the
Department of Commerce's Economic Bulletin Board (EBB). The EBB, which can be
accessed using personal computers, is an inexpensive service provided by the Department of
Commerce. For more infonnation concernmg this service call 202-482-1986.
000
PA-240
RR-1363
TABLE VI - HOLDINGS OF TREASURY SECURITIES IN STRI?O~J FORM, OCTOBER 31, 1996
(In thcusands)
Principal Amoum Outstanding
Loan Description
7-1/4% Note
8-1/2% Note
8-5/8% Note
8-7/8% Note
8-1/8% Note
0-1996 ......
A-1997 ......
9-1997 ......
C-1997.. ....
A-1998 ......
9% Note 9-1998 ..........
9-1/4% Note C-1998 ......
8-7/8% Note 0-1998 ......
8-7/8% Note A-1999 ..
9-1/8% Note B-1999 ......
8% Note C-1999 ......
7-7/8% Note 0-1999 ......
8-1/2% Note A-2000 ......
8-7/8% Note 9-2000 ......
8-3/4% Note C-2000 ......
8-1/2% Note 0-2000 ......
7-3/4% Note A-2001 ......
8% Note 9-2001.. ........
7-7/8% Note C-2001 ......
7-1/2% Note 0-2001.. ....
7-1/2% Note A-2002 ......
6-3/8% Note 9-2002 ......
6-1/4% Note A-2003 ......
5-3/4% Note 9-2003 ......
5-7/8% Note A-2004 ......
7-1/4% Note 9-2004 ......
7-1/4% Note C-2004 ......
7-7/8% Note 0-2004 ......
7-1/2% Note A-2005 ......
6-1/2% Note 9-2005 ......
6-1/2% Note C-2005 ......
5-7/8% Note 0-2005 ......
5-5/8% Note A-2006 ......
6-7/8% Note 9-2006 ......
7% Note C-2006 ......
6 1/2% Note 0-2006 ......
11-5/8% Bond 2004 .......
12% Bond 2005 ...........
10-3/4% Bond 2005 .......
9-3/8% Bond 2006 ........
11-3/4% Bond 2009-14 ....
11-1/4% Bond 2015 .......
10-5/8% Bond 2015 .......
9-7/8% Bond 2015 ........
9-1/4% Bond 2016 ........
7-1/4% Bond 2016 ........
7-1/2% Bond 2016 ........
8-3/4% Bond 2017 ........
8-7/8% Bond 2017 ........
9-1/8% Bond 2018 ........
9% Bond 2018 ............
8-7/8% Bond 2019 .......
8-1/8% Bond 2019 .......
8-1/2% Bond 2020 ........
8-3/4% Bond 2020 ........
8-3/4% Bond 2020 ........
7-7/8% Bond 2021.. .....
8-1/8% Bond 2021.. ......
8-1/8% Bond 2021.. ......
8% Bond 2021.. ..........
7-1/4% Bond 2022 .....
7-5/8% Bond 2022 ........
7-1/8% Bond 2023 ........
6-1/4% Bond 2023 ........
7-1/2% Bond 2024 ........
7-5/8% Bond 2025 ..
6-7/8% Bond 2025 ..
6% Bond 2026 ........
6-3/4% Bond 2026 ..
Total. ..
Maturity Date
11/15/96 ......
05/15/97 ......
08/15/97 ......
11115/97 ......
02115/98 ......
05/15/98 .... ..
08/15/98 ......
11/15/98 ......
02115/99 ....
05/15/99 ......
08/15/99 ......
11/15/99 ......
02115/00 ......
05/15100 ......
08/15/00 ......
11/15/00 .....
02115/01 ......
05/15/01 ......
08/15/01 ......
11/15/01.. ....
05/15/02 ......
08/15/02 ......
02115/03 ......
08/15/03 ......
02115/04 ......
05/15/04 ......
08/15/04 ......
11/15/04 ......
02115/05 ......
05/15/05 ......
08/15/05 ......
11/15/05 ......
02115/06 ......
05/15/06 ......
07/15/06 ......
10/15/06 ......
11115/04 ......
05/15/05 .....
08/15/05 ......
02115/06 ......
11/15/14 ......
02115/15 ......
08/15/15 ......
11/15/15 ......
02115/16 ......
05/15/16 ......
11/15/16 ......
05/15/17.. ....
08/15/17 ......
05/15/18 ......
11/15/18 ......
02115/19 ......
08/15/19 ......
02115/20 ......
05/15/20 ......
08/15/20 ......
02115/21.. ....
05/15/21 ......
08/15/21 ......
11/15/21.. ....
08/15/22 ....
11/15/22 ......
02115/23 ......
08/15/23 ......
11/15/24 ......
02115/25 ......
08/15/25 ......
02115/26 ......
08/15/26 ......
. .......................
PortIOn Held In
Unstnpoed Form
Total
20,258,810
9,921,237
9,362,836
9,808,329
9,159,068
9,165,387
11,342,646
9,902,875
9,719,623
10,047,103
10,163,644
10,773,960
10,673,033
10,496,230
11,080,646
11,519,682
11,312,802
12,398,083
12,339,185
24,226,102
11,714,397
23,859,015
23,562,691
28,011,028
12,955,077
14,440,372
13,346,467
14,373,760
13,834,754
14,739,504
15,002,580
15,209,920
15,513,587
16,015,475
22,740,446
10,984,212
8,301,806
4,260,758
9,269,713
4,755,916
6,005,584
12,667,799
7,149,916
6,899,859
7,266,854
18,823,551
18,864,448
18,194,169
14,016,858
8,708,639
9,032,870
19,250,798
20,213,832
10,228,868
10,158,883
21,418,606
11,113,373
11,958,888
12,163,482
32,798,394
10,352,790
10,699,626
18,374,361
22,909,044
11,469,662
11,725,170
12,602,007
12,904,916
10,893,818
925.429,824
Portion Held in
Stripped Form
II
II
II
II
Reconstituted
This Month #1
6.534,729
7,605,148
6.737,787
8.262.646
6.570,075
7,991,623
6.867,903
7.297,044
7.367,560
8.015,433
5.688,230
7,134.886
7,435.282
7,996,002
8.641,183
9.609,585
21,216,102
10,108,637
22,678,215
23.223,395
27.616,628
12.782.277
14.435,572
13.300,867
14,373,760
13.834,754
14,739,504
15,002,580
15.209,920
15.513,587
16.015,475
22.740,446
10.984,212
4,135.406
2.092.808
6.644,113
4.741,516
2.063,984
9,943,959
3.452,636
4.551,059
6.254,854
18.633,951
17.959,008
11,316,729
7.962,458
2.342,239
2.502,870
5.113,198
18.069.512
6.318,068
4.170,883
6.213.646
9,966,173
5,181,928
4.454,362
6.392.194
8.5;6,790
3,066.026
14.262.361
22.397,204
3985,662
5893,170
12.174.487
12.430,516
10.870,618
4,083,200
2,330,400
2,587,200
3,273.600
1,553,920
2,427,600
3,080,000
3,332,800
1,728,000
3,179,200
2,866,600
3,406.400
2,657,600
4,808,000
3,945,760
4,084.400
3,316,800
3,756,900
2,729,600
3,010,000
1,605,760
1,180,800
339,296
394,400
172,800
4,800
45,600
0
0
0
0
0
0
0
0
0
4,166.400
2,167,950
2,625,600
14.400
3,941,600
2,723,840
3,697,280
2,348,800
1,012,000
189,600
905,440
6,877,440
6,054.400
6,366,400
6,530,000
14,137,600
2,144,320
3,910,800
5,988,000
15,204,960
1,147,200
6,776,960
7,709,120
26,406,200
1,776,000
7,633,600
4,112,000
511,840
7.484,000
5,832,000
427,520
474.400
23,200
II
II
II
II
II
II
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
I
420,000
299.600
44,800
46,400
55,680
52.400
16,000
43,200
24,000
81,600
9,600
65,600
4,000
4,800
206,880
86,000
44,000
23,800
81,600
76,000
94,000
156,800
45,888
199,200
0
0
5,600
0
0
0
0
0
0
0
0
0
59,200
225,000
207,200
0
111,200
1,604,000
716,800
518,400
24,800
200,000
11,600
832,000
430,400
148,800
231,000
960,000
249,600
129,200
140,000
469,280
78,400
208,320
96,000
136,300
196,000
64,000
176,000
112,256
499,920
798.400
197,120
30,000
0
698.207,518
227,222,306
II
12,048,644
16.175.610
7,590.837
6n5.636
I
I
I
======================================================================================== ====================== =====================
#1 Effective May 1,1987. securities held in stripped form were eligible for reconstitution to their unstripped form.
Note: On the 4th workday of each month Table V1 will be available after 3:00 p.m. eastem time on the Ccmmerce Department's
Economic Bulletin Board (EBB). The telephone number for more information about EBB is (202) 482-1986 The balances
in thiS table are subject to audit and subsequent adjustments.
DEPARTMENT
OF
THE
.
TREASURY {""-.)
TREASURY
.
NEW S
November 7, 1996
Monthly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reserve assets data for the month of
October 1996.
As indicated in this table, U.S. reserve assets amounted to $75,558 million at the end
of October 1996, up from $75,509 million in September 1996.
End
of
Month
Total
Reserve
Assets
Gold
Stock 1/
'"
Special
Drawing
Rights
1/1/
Foreign
Currencies 1/
ESF
System
Reserve
Position
in IMF
1/
1996
September
75,509
11,050
10,177
19,449
19,412
15,421
October
75,558
11,050 P
10,226
19,334
19,431
15,517
1/
1/
1/
Valued at $42.2222 per fine troy ounce.
Beginning July 1974, the IMF adopted a technique for valuing the SDR based on a
weighted average of exchange rates for the currencies of selected member countries. The
U.S. SDR holdings and reserve position in the IMF also are valued on this basis
beginning July 1974.
Includes allocations of SDRs by the IMF plus transactions in SDRs.
~/ Holdings of Treasury Exchange Stabilization Fund (ESF) and Federal Reserve System.
Beginning November 1978, these holdings are valued at current market exchange rates
or, where appropriate, at such other rates as may be agreed upon by the parties to the
transactions.
p
Preliminary
RR-1364
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
From: TREASURY PUBLIC AFFAIRS
D EPA R T 1\1 E N T
0 F
THE
12-5-95 3:51pm
p. 19 of 20
T REA S LJ R \'
NEWS
TREASURY
omCE OF PUBUC AFFAIRS • ll500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C. • 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
November 6, 1996
A~ENDED
CONTACT:
Office of Financing
202/219-3350
NOVEMBER QUARTERLY FINANCING ANNOUNCEMENT
In the Highlights section of the Quarterly Financing
Announcement dated October 30, 1996, the following entries should
be added to the "Due dates and CUSIP numbers for additional
TINTs~ line for the 3D-year bonds:
May 15, 2025 --- 912833 LV a
November 15, 2025 --- 912833 LX 6
May 15, 2026 --- 912833 LZ 1
All
o~~er
particulars of the announcement remain unchanged.
000
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
November 7, 1996
RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
Tenders for $19,387 million of 52-week bills to be issued
November 14, 1996 and to mature November 13, 1997 were
accepted today (CUSIP: 9127942W3).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.19%"
5.21%'
5.20%-
Investment
Rate
5.48%"
5.50%'
5.49%-
Price
94.752
94.732
94 .742
$5,000,000 was accepted at lower yields.
Tenders at the high discount rate were allotted 4%".
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
Receiyed
$57,496,160
Accepted
$19,387,160
$51,795,205
700,955
$52,496,160
$13,686,205
700,955
$14,387,160
5,000,000
5,000,000
o
o
$57,496,160
$19,387,160
~l additional $734,200 thousand of bills will be
issued to foreign official institutions for new cash.
5.02 - 94.924
RR-1366
From: TREASURV PUBLIC AFFAIRS
12-5-96 3:51pm
UBLIC DEBT NEWS
Dt:partmcnt of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IrtlMEDIATE RELEASE
November 7, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 30-YEAR BONDS
Tenders for $10,000 million of 30-year bonds to be issued
November 15, 1996 and to mature November 15, 2026 were
accepted today (CUSIP: 912810EYO}.
The interest rate on the bonds will be 6 1/2t. The range
of accepted bids and corresponding prices are as follows:
Low
High
Average
Yield
6.618%
6.625%
6.619%"
Price
98.470
98.380
98.457
Tenders at the high yield were allotted SIt.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Received
$26,841,353
Accepted
$10,000,139
The $10,000 million of accepted tenders includee $258
mil~ion of noncompetitive tenders and $9,742 million of
competitive tenders from the public.
I~ addition, $l,~70 million of tenders was also accepted
a~ C~e average price from Federal Reserve Banks for their own
aC';C;Ql,nt
in exchange for maturing securities.
The minimum par amount required for STRIPS is $400,000.
amounts must be in multiples of that amount.
T'=irq,,":
p. 20 of 20
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
~~178~9~. . . . . . . . . . . . . . . . . . . . . . . . . ..
............................
OFFICE OF PUBUC AFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220 • (202) 622-2960
FOR IMMEDIATE RELEASE
November 12, 1996
STATEMENT OF TREASURY SPOKESMAN HOWARD SCHLOSS
Secretary Rubin spoke to Japanese Finance Minister Mitsuzuka this morning by
telephone, and congratulated the Minister on his appointment and said this Administration
looked forward to close cooperation with the new Japanese government on issues of mutual
interest.
Minister Mitsuzuka outlined his government's financial reform proposals. Secretary
Rubin said he welcomed the proposals.
Secretary Rubin said after the phone call, "The United States has sU!Jported for some time
the broad objectives of deregulation and transparency in Japan's financial market. We look
forward to learning more about the concrete proposals envisioned by the Japanese Governm~nt to
further develop and open the Japanese financial market."
--30--
RR-1368
Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington. DC 20239
FOR IMMEDIATE RELEASE
November 12, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13 -WEEK BILLS
Tenders for $14,015 million of 13-week bills to be issued
November 14, 1996 and to mature February 13, 1997 were
accepted today (CUSIP: 9127943Y8).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
4.99\"
5.02\"
5.02\"
Investment
Rate
5.12\"
5.16\"
5.16l-
Price
98.739
98.731
98.731
Tenders at the high discount rate were allotted 81l-.
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Received
$46,641,078
Accepted
$14,015,185
$40,872,601
1. 488,592
$42,361,193
$8,246,708
1. 488,592
$9,735,300
3,525,485
3,525,485
754,400
$46,641,078
754,400
$14,015,185
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
5.00 -- 98.736
RR-1369
5.01 -- 98.734
UBLle DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
November 12, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $14,079 million of 26-week bills to be issued
November 14, 1996 and to mature May 15, 1997 were
accepted today (CUSIP: 9127944JO).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.06%5.07%'
5.
on·
Investment
Rate
5.26%5.28%'
5.28%"
Price
97.442
97.437
97.437
Tenders at the high discount rate were allotted 43%".
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
RR-1370
Received
$53,873,865
Acce2 t ed
$14,079,059
$47,124,911
1,187,054
$48,311,965
$7,330,105
1,187,054
$8,517,159
3,600,000
3,600,000
1,961,900
$53,873,865
1,961,900
$14,079,059
NEWS
'lREASURY
omCE OFPUBUCAFFAIRS -1500 PENNSYLVAN1AAVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622.2960
EMBARGOED UNTIL 2:30 P.M.
November 12, 1996
CONTACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $28,000 million, to be issued November 2l,
1996. This offering will provide about $1,525 million of new cash
for the Treasury, as the maturing weekly bills are outstanding in
the amount of $26,475 million.
Federal Reserve Banks hold $7,029 million of the maturing
bills for their own accounts, which may be refunded within the
offering amount at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $4,583 million as agents for
foreign and international monetary authorities, which may be
refunded within the offering amount at the weighted average
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.
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 (31 CFR Part 356) for the sale and issue by the
Treasury to the public of marketable Treasury bills, notes, and
bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
RR-1371
HIGHLIGHTS OP TREASURY OPPBRXNGS OF
TO BE
'"
"
~SSOBD
NOVBMBBR 21,
Oel.ring
, . . . .
~a8eriptioA of Qffering&
Term and type of security
CUSIP number
. . .
Auction date "
. .
Issue date . . . . . . .
Maturity date . . .
Original issue date .
CUrrently outstanding . .
Minimum bid amount
Multiples . . . . . . .
U
o
it!
W
J
lI101
J
t-
..
M
M
~
UJ
~
I~
~
I
(II
004
I
>
o
z
B1LLS
November 12, 1996
0.
~
WEBK~Y
199~\
~ount
. .
$14,000 million
$14,000 million
. . . . .
. . .
. . .
... .
. . .
91-day bill
912794 3Z 5
November 18, 1996
November 21, 1996
February 20, 1997
August 22, 1996
$13,019 million
$10,000
$ 1,000
182-day bill
912794 4K 7
November 18, 1996
November 21, 1996
May 22, 1997
November 21, 1996
. . . . .
$10,000
$ 1,000
The following rule. apply to all ,ecuriti •• mentioned above.
SubmisQion of Bids:
Noncompetitive bids
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
Competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10\.
(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 $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 .
M~irnum Recognized Bid
at a Single Xield
35' of public offering
35% of public offering
Maximum Award . . . . .
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 . . .
Full payment with tender or by charge to a funds
...
account at a Federal Reserve Bank on issue date
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
November 13, 1996
Contact: Michelle Smith
(202) 622-2960
RUBIN ANNOUNCES US/CHINA ECONOMIC COMMISSION MEETING
Treasury Secretary Robert E. Rubin on Wednesday announced he and Chinese Finance
Minister Liu would co-host a US-China Joint Economic Commission (lEC) meeting November
is and 19in Washington, D.C., to discuss bilateral economic issues, including the structure n,nd
performance of the us, and Chinese economies.
The.lEC provides both the United States and China an invah..able opportunity to learn
from one another and to further our bilateral cooperation," Senetary Rubin s3.id. "The growth of
our economic rdi:ltionship at all levels is evidenced by the broad f':mge of U.S. and Chinese'
agencies taking part in the meetings."
Our agenda for the meetings will include dis~ussions un recent economic performance
and approaches to macroeconomic management, including the significance of the bilateral trade
imbalance; finan~ial market reform and supef'iision; and customs cooperation and tax issues,"
Secretary Rubin said.
Representatives from the Treasury, the office of the U.S. Trade Representative, the
Council of Economic Advisors, the State Department, the Federal Reserve Board, the Securities
and Exchange Commission and other U.S. government agencies will participate as patt of the
American delegation.
The Chinese delegation will include representatives from the Ministry of Finance, the
State Planning Commission, the Committee on Restructuring the Economic System, the Ministry
of Foreign Affairs, the Ministry of Foreign Trade, the State Economic and Trade Commission,
the People's Bank of China and the China Securities Regulatory Commission.
A photo opportunity is planned for 1:30 p.m. Monday and a joint closing press
conference is scheduled at 12:45 p.m. Tuesday in Treasury's Diplomatic Reception Room. Press
without Treasury, White House, State or Congressional passes should contact Treasury's Office
of Public Affairs at (202) 622-2960 for clearance by close of business Friday, November 15 with
the following information: name, date of birth and social security number. This information may
be faxed to Hortense Henderson at (202) 622-1999.
-30RR-1372
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
UBLIC DEBT NEWS
Department of the Treasury •
Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
November 13, 1996
RESULTS OF TREASURY'S AUCTION OF 34-DAY BILLS
Tenders for $13,217 million of 34-day bills to be issued
November 15, 1996 and to mature December 19, 1996 were
accepted today (CUSIP: 9127943S1).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.19%"
5.20%"
5.20%"
Investment
Rate
5.29%'
5.30%"
5.30%"
Price
99.510
99.509
99.509
Tenders at the high discount rate were allotted 38%".
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
RR-1373
Received
$61,367,850
AcceI2ted
$13,217,310
$61,367,000
850
$61,367,850
$13,216,460
850
$13,217,310
0
0
0
$61,367,850
0
$13,217,310
'lREASURY
"~"""""~/78~
NEWS
__" _________
OmCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE. N.W. - WASHINGTON. D.C. _ 20220 _ (202) 622.2960
EMBARGOED UNTIL 2:30 P.M.
November 13, 1996
CONTACT:
Office of Financing
202/219-3350
TREASURY TO AUCTION 2-YEAR AND 5-YEAR NOTES
TOTALING $30,750 MILLION
The Treasury will auction 518,250 million of 2-year notes
and $12,500 million of 5-year notes to refund $28,336 million of
publicly-held securities maturing November 30, 1996, and to raise
about $2,425 million new cash.
In addition to the public holdings, Federal Reserve Banks
hold $475 million of the maturing securities for their own
accounts, which may be refunded by issuing additional amounts
of the new securities.
The maturing securities held by the public include $3,842
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.
Both the 2-year and 5-year note auctions will be conducted
in the single-price auction format. All competitive and noncompetitive awards will be at the highest yield of accepted
competitive tenders.
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 Offering Circular (31 CPR
Part 356) for the sale and issue by the Treasury to the public of
marketable Treasury bills, notes, and bonds.
Details about each of the new securities are given
attached offe~ing highlights.
000
Attachment
RR-1314
~n
the
HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC OF
2-YEAR AND 5-YEAR NOTES TO BB ISSUED DECEMBER 2, 1996
November 13, 1996
Offering Amount . .
.
.
.
Description of Offering~
Term and type of security .
Series
. . .
CUSIP number
Auction date
Issue date
Dated date
Maturity date .
Interest rate
Yield . . . . . . . .
Interest payment dates
Minimum bid amount
Multiples . .
Accrued interest
payable by investor .
Premium or discount .
$18,250 million
$12,500 million
2-year notes
AM-1998
912821 2B 7
November 19, 1996
December 2.. 1996
December 2, 1996
November 30, 1998
Determined based on the
highest accepted bid
Determined at auction
May 31 and November 30
$5,000
$1,000
S-yaar notes
Q-2001
912827 2C 5
November 20, 1996
December 2. 1996
December 2, 1996
November 3D, 2001
Determined based on the
highest accepted bid
Determined at auction
May 31 and November 30
$1,000
$1,000
None
Determined at auction
None
Determined at auction
The following rules apply to all securities mentioned above:
Submission of Bids:
. Accepted in' full up to $5,000,000 at the highest accepted yield
Noncompetitive bids
(1) Must be expressed as a yield with three decimals, e.g., 7.123\
Competitive bids
(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 Single Yield
. 35\ of public offering
Maximum Awa~ . . . . .
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. Bastern Standard time on auction day
Payment Terms . . . . . . . Full payment with tender or by charge to a funds account at a
Federal Reserve Bank on issue date
DEPARTMENT
OF
THE
'IREASURY ! .~. . . .::.~}
~
't'
TREA'SURY
NEW S
1789
OrnCE OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
Embargoed until delivery at 2: 15 PST.
Remarks as prepared for delivery
November 15, 1996
THE TREASURY'S STUDY OF CREDIT UNIONS:
SOME INITIAL THOUGHTS ON
SCOPE AND APPROACH
Remarks of Richard S. Carnell
Assistant Secretary of the Treasury
for Financial Institutions
California Credit Union League
Annual Meeting and Convention
Anaheim, California
I.
INTRODUCTION
In a recently enacted bill to keep the government running during the next year,
Congress required the Treasury Department to conduct a study of several issues relating
to credit unions. J should note at the onset that we at the Treasury did not ask to do this
study. Congress devised it and assigned it to us. But it's now the law of the land. We
take it seriously and we'll carry it out conscientiously, energetically, and fairly. More
about that in a moment.
Now the ink had been dry on the new law for barely three weeks when I got a
letter from Chris Kerecman -- your Director of Regulatory and Congressional Affairs -inviting me to speak to you about the study. I know Chris from his days at the National
Credit Union Administration, and I have the highest regard for him. But my first thought
was that it was too soon to be talking about the study. We're just starting work on it. We
certainly don't claim to have the answers now. And we'd rather be listening than talking.
RR-1375
For press releases. speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
2
But Chris urged me to go ahead and speak to you. He told me that credit unions
were strongly interested in, and concerned about, the study. He said that it would be
helpful for me to share some thoughts -- however preliminary -- on what the study
involves and how we will go about conducting it.
II.
THE STATUTORY STUDY REQUIREMENT
A.
Scope of the Study
Let me begin by talking about what Congress has directed the Treasury to do in
the study.
Section 2606 of the Omnibus Appropriations Act for 1997 requires the Secretary
of the Treasury to conduct a study and evaluation of three major topics relating to credit
unions. The flrst topic involves the National Credit Union Share Insurance Fund. The
second involves the supervision and fmancial health of corporate credit unions. And the
third involves the NCUA's regulations. The study is due September 30, 1997. We're to
conduct it in consultation with the NCUA, the FDIC, and Treasury's Office of the
Comptroller of the Currency, which regulates national banks.
Let me now take a more specific look at the three topics I listed a moment ago.
The first is the National Credit Union Share Insurance Fund. Congress has directed us to
examine two specific issues relating to the Fund. To begin with, we're to study whether
the 1 percent deposit that credit unions have made into the Fund should continue to be
treated as an asset on credit unions' books, and thus as part of their equity capital -- or
whether credit unions should, instead, expense it. We're to study whether the Fund
should be administered by someone other than the NCUA, and what would be the
implications of such a change. More generally, Congress also directed us to evaluate the
NCUA's oversight of the insurance fund.
Second, Congress has required us to evaluate the nation's ten largest corporate
credit unions. We're to do this "in cooperation with appropriate employees of other
federal agencies with expertise in the examination of federally insured financial
institutions." We're to look at corporate credit unions' investment practices. We're to
examine their "financial stability, financial operations, and financial controls." And we're
to review how the NCUA supervises them.
Third, Congress has instructed us to study the NCUA's regulations. Let me read
you the exact language on this point. "The Secretary ... shall conduct a study and
3
evaluation of ... the regulations of the [National Credit Union] Administration." Now
you could conceivably read that language as calling for a study of all the NCUA's
regulations, which occupy 250 pages in the Code of Federal Regulations. But quite a few
of those regulations, however appropriate in themselves, have little connection to
anything else even touched on in the law calling for the study. To take only a few
examples, the NCUA has regulations on adjudicative hearings, advertising, the
Community Development Revolving Loan Program, flood insurance, the Freedom of
Information Act, group purchasing activities, investigations, money laundering, pension
plan custodians, preserving records, and suing the government for property damage,
personal injury, or death. Did Congress really intend us to delve into all of them? I think
not. Instead, I'm inclined to believe that the best approach would be for us to review the
regulations dealing with corporate credit unions, the National Credit Union Share
Insurance Fund, and the safety and soundness of credit unions.
B. Our Approach
Now that I've told you in general terms what we plan to cover, let me tell you how
we plan to do it.
I think a few simple principles should guide our approach: Be fair and objective.
Be thorough and rigorous. Be open and inclusive.
Let me emphasize that we come to this study with open minds, open ears, and an
open door. We recognize that our work has just begun. And we believe that one way of
making sure we do a good job is to talk with a wide range of people about the issues we
must cover in the study.
I like to think we've already started the process of listening. We have already had
very constructive initial meetings with the NCUA's Board of Directors and its senior
staff. We appreciate their willingness to give us their perspective as we study these
issues. We are currently scheduling meetings with CUNA and NAFCU. And we also
look forward to meeting as well with other interested parties, including other financial
institutions.
We plan to visit some corporate credit unions. And we want to be sure to talk
with people like you -- people from credit unions large and small, rural and urban. We
want to understand your perspective on the issues at stake in the study. Indeed, one
appeal of your invitation was the opportunity to have a series of smaller meetings earlier
4
today with a wide range of credit union officials. I certainly hope to continue these types
of meetings.
III. CREDIT UNIONS AND THE IDEAL OF SELF-AUDIT AND RENEWAL
We at the Treasury want to set high standards for our work on the study. I'd like
to close now by taking a few minutes to reflect on an important credit union ideal: the
ideal of self-audit and renewal. This is a high standard that you, as credit unions, have
set for yourselves. And there's a striking expression of this in the "Statement of Credit
Union Operating Principles," a document endorsed by CUNA and adopted by the World
Council of Credit Unions. This statement calls for all credit unions to pursue self-audit
and renewal. More specifically, it says: "Credit union management and staff should
regularly ask the question, 'How have we acted like (or unlike) a credit union today?'"
This is not the sort of statement you see just anywhere. It's a call to reflection and
renewal. It's a call to examine what you do -- and how you operate -- in light of credit
union objectives.
The concept of self-audit carries with it an openness to change. Think back to that
pair of questions: How have we acted like a credit union today? How have we acted
unlike a credit union today? The whole idea of asking such questions is to try to rise
above old habits and first reactions -- the easy, comfortable, usual way of doing things.
I believe that if self-audit and renewal is your goal, you don't just brush off new
ideas. You look at what can best help you realize your objectives.
I can't tell you today what conclusions we'll draw in our forthcoming study. I can
tell you that we'll approach it objectively. We'll be evenhanded in what we do.
Whatever the outcome may be, whether you agree with it, disagree with it, or even if
you're indifferent, I hope you'll look at this study -- and the process of sharing with us
your views on it -- as an opportunity to reflect on where you as credit unions really want
to go.
I hope that your own desire for self-audit will help us to identify improvements
that will benefit credit unions in the years ahead. Surely that's a tall order. But it's one
that is achievable, and it's a reasonable goal to set for oneself.
Thank you for the opportunity to speak here today. I hope you will continue your
excellent work in communities across the state of California.
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
omCE OF PUBliC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASlllNGTON, D.C .• 20220 • (202) 622-2960
Delivered Remarks
Bretton Woods Committee Annual Meeting
November 15, 1996
Secretary Robert Rubin
I am delighted to be here with you. I think I am right in saying that the first public speech I gave
after the President announced that I was going to be the new Secretary of the Treasury two years
ago was to this very group. The issues I spoke about then are the issues I am going to speak
about now, because our commitment to this is the same and unwavering.
From the beginning of the Administration, the President has spoken -- I think eloquently -- about
the need and importance for U.S. leadership in the global economy because of the importance of
that leadership to our economic and our national security interest One of things that struck me
about then-Governor Clinton when I first met him, and talked to him about economic issues, was
that he had really internalized the importance of the global economy and it was really no
different from the investment bankers I dealt with on a daily basis. Although the governor of a
small state in the South, he understood that the world had changed; he understood that our
economic success was going to be a function of a healthy global economy, and the United States
was truly the only nation in the world that could provide leadership in the global economy. And
that clearly has been his position since he's been President of the United States. We've had a
coordinated strategy which has enabled us to promote our interests in the global economy and
promoting global growth and reform in the global economy, which is also in our interest
Opening markets and expanding trade have been a large part of this effort, and the most visible
part of the effort. Nafta, GATT and scores of trade agreements have been the result of this
strategy. At the same time that we've had trade agreements, the Administration has vigorously
worked to help U.S. companies sell abroad, which I think is an appropriate function of
government In the President's second term, we will continue to pursue an active trade agenda.
Even during the campaign, when trade was not a particularly popular subject politically, the
President spoke about free and fair trade and opening markets around the world. In the second
term, we will work to continue trade liberalization in Latin America and Asia particularly.
RR-1376
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Important steps can be taken without Congressional action, they can be taken by the Executive
himself, for example, trade agreements like the bilateral financial services agreement we have
with Japan, customs simplification. On the other hand, major agreements, will almost always
require Congressional approval. In order to enter into effective negotiations of major
agreements, a predicate is fast track legislation. As you know, in the recent past, getting a
renewal of fast track legislation has been hung up over the issues of environmental and labor
standards. To be sure that is a very difficult challenge which lies ahead. I believe it can done, but
it can only be done if the advocates of both sides of the issues are willing to move from the
purity of their positions and work together to find common ground.
That said, there is another part to our strategy in the global economy, and one which receives far
less attention in the public domain, but which is absolutely vital, and that is promoting growth
and reform in the developing world. Bringing developing countries into the economic
mainstream raises living standards, promotes political stability -- and it increases markets for
U.S. exports. International financial institutions, which your group is so focused on, the World
Bank, the IMP, and sister banks to the World Bank, are absolutely central to that effort.
I think relatively few Americans have a sense of how important developing nations have become
to our economic well-being. The countries of the developing world already are the fastest
growing U.S. export market, representing about 40 percent of our total exports. Developing
countries in Asia alone account for 23 percent of world GDP, compared to the United States
which is now at 21 percent of world GDP. Those Asian developing nations have had imports
grow at an average annual rate of ten percent over the past two decades and imports this year
will aggregate approximately $1. 0 trillion. That is an enormous market. Other parts of the
developing world also present exciting potential. Latin America is the second fastest growing
economic region in the world. Central and Eastern Europe and the former Soviet Union are 25
countries with more than 400 million people. Each of these areas are already major markets, and
each of these areas are, in their totality, the markets of the future for our country.
The President has strongly promoted private sector focus on the emerging markets. The late
Secretary of Commerce, Ron Brown, had as his central focus in his efforts, an emerging market
strategy. In addition, we have acted to further growth and reform in the developing and
transitional world through the international financial institutions. However, without change and
innovation, any institution will ultimately lose its edge. In that spirit, we have worked
unceasingly for change and innovation in the international financial institutions. I believe there
are three steps which should continue to guide us in that effort:
First, and I would say foremost, we must maintain U.S. leadership by meeting our financial
commitments to the financial institutions. We are the only major nation in the world that is in
arrears to the World Bank. We are in arrears to several sister banks. That must not be allowed to
continue. The Administration has been committed and continues to be committed to working
with the Congress to obtain the resources necessary to fund the these key programs and
institutions, always working within the constraints of our balanced budget goals. But if past is
2
prologue, obtaining Congressional support will be very difficult. Difficult, but doable. I have
spent an enormous amount of time personally going up to the hill, working with Congress
toward these ends. As I said a moment ago, it is a very difficult undertaking in these
circumstances, but, in my view, if we all work together, we in the Administration, and you, who
understand these issues so well, then it is doable.
There is, unfortunately, very little recognition in the public domain in this country, or in
Congress that these institutions are not char.ities, but rather are critically important to our
economic and national security interests. Multilateral development banks have worked to
strengthen the economies of developing countries, which, in turn, results in wider markets for
US. goods, as I mentioned a moment ago. For example, in 1995 US. exports to the 79 countries
eligible for International Development Assistance aggregated something like $25.5 billion. And
in that same period, IDA graduates imported from the United States roughly $60 billion worth of
goods and services. At the same time, the Th1F has contributed substantially, working with
certain of our key US. trading partners, in this hemisphere, for example, Chile, Argentina and
most notably, Mexico.
In the time I have been Secretary of the Treasury, one of things that I have done that has been
most meaningful to me is to visit multilateral development bank projects in India, Indonesia, the
Philippines, Argentina, and Brazil. I've seen these institutions working at the ground level. I
remember in the Philippines, meeting a woman who had received a micro-enterprise loan and
had bought some sort of little taxi and that opportunity had dramatically changed her life and the
life of her family. In India we visited a very, very, poor village that had learned how to conserve
water in a parched area, and, as a consequence, dramatically improved the standard of living. We
can replicate those kind of examples across the developing and transitional world. They are not
only having an enormous effect on those people, but, as I said a moment ago, they are creating
markets for our goods and services and enhancing political stability enormously, which is in our
national security interest.
This committee or organization has played a major role in obtaining resources for the Bretton
Woods institutions in the past. I know Henry says you are not a lobbying organization, and I
recognize that, but it is also true in my judgement that we are at a turning point with respect to
American involvement with these institutions and you are a unique group of people. You have
an understanding of the importance of these institutions, and you also have the ability to be
effective in helping obtain the necessary support. I would suggest that there may not have been a
more important time for you to get involved in that effort than today and that we work in the
months ahead to keep our commitments and to help fund these vitally important institutions.
The second step we must take to strengthen the international financial institutions is to make
them more effective in combating corruption throughout the developing and transitional world.
We have stressed increased transparency. We have stressed a focus on encouraging good
governance. Corruption, and the more general criminality it supports, is a major impediment to
political stability and growth. When I go around to these countries and visit the American
3
Chamber of Commerce, I hear over and over again how much of an impediment that kind of
activity, corruption, is.
Jim Wolfensohn, in my judgement, deserves enormous credit in focusing on this issue, as does
Michael Camdessus at the IMF. The challenge now is to develop practical mechanisms for
combating corruption in these parts of the world.
Third, we must continue, as Henry suggested, to focus on the appropriate roles of the
international financial institutions, the governmental institutions, and the private sector.
Clearly, we are in a new world with a global economy and also the availability of large amounts
of private sector capital for developing countries. The dimension of the capital markets did not
exist ten years ago. The private sector can meet many of the capital needs in these countries and
to the extent that they do meet these needs, they can, in my view at least, meet them more
efficiently than public sector capital and, more importantly, free up the scarce capital they have
in their financial institutions for education, health care, and the other areas which the private
sector will not, by its nature, get involved in.
However, the ability to attract private sector capital, even in the more advanced developing
countries, has been hampered by a lack of developed capital markets and a shortage of
sophisticated financial instruments, as well as, in certain of these countries, continued
uncertainty about the commitments to economic and political reform.
Multilateral development banks play four critical roles in attracting private sector capital to
developing and transitional countries. First, they help create an overall macro economic and
structural policy environment that is conducive to private sector activity. Second, they help build
the necessary financial capital market regulatory and legal institutions through lending and
technical assistance. Thirdly, the multilateral development banks can provide direct financing for
parts of projects that will then attract private sector capital for the other parts. They can also
make equity investments, and they can provide guarantees or insurance. Finally, international
financial institutions playa critical role in areas where the private sector will not, by its nature,
participate in, which is health care, women's programs, education, promoting the rule of law and
the other underpinnings of the economy and society that are so important to private sector
activity.
In the poorest developing nations, the attraction of private sector capital is a particular problem.
Africa is clearly the most difficult part of the world in this respect for many reasons. At least one
reason is the last two or three decades, the public sector, the governments, have become vastly
involved in all aspects of the economy. And I'll tell you, there is little attention paid to the
underpinnings of economic activity, from the development of capital markets to education and
health care. An example of a type of program that I think would be particularly suited for
attracting private sector activity in the poorest nations is micro enterprise lending, the kind of
thing I mentioned before with the example in the Phillippines. There is a micro enterprise
4
summit that is going to be held in February and that I am going to have the opportunity to
attend. We will attempt there to further the development of these programs around the world in
the poorest countries.
Another area in which the World Bank can increase activity in order to attract private sector
capital to the poorest nations, at least in my judgement, is to expand the current guarantee
program. I believe that gl!arantees and other kinds of more sophisticated financial mechanisms
are an effective way to leverage the World Bank capital and maximize the infusion of private
sector capital into these poorer nations.
Let me close, if I may, by discussing a subject I alluded to earlier, in my view, a subject
absolutely critical to the economic well being of this country, and that is the importance of
building a strong domestic constituency to continue U. S. engagement and leadership in the
global economy.
Many observers feel that there is a growing resistance in this country, and, for that matter, many
of the other nations in the developed world, to engagement in the global economy. There is a
considerable question of whether Nafta or GATT could have been passed in the environment
that now exists. When we came forward with our Mexican support program, and that program
was designed to help Mexico, but to help Mexico because it was in our economic interest and
our national security interest to help Mexico, that Mexican support program was met with
vigorous Congressional, Republican opposition. And in the primary elections, there was, as you
well know, a candidate who argued vigorously for protectionism, and found a distressingly large
audience for that argument. On the other hand, the two major candidates -- President Clinton and
Senator Dole -- took the internationalist position. The lesson that I at least draw from all this is
that there is great unease in the American public about American engagement in the global
economy. And that there is a large segment of the public -- maybe not a majority, hopefully not
a majority, but nevertheless, a large segment -- that believes international financial institutions
and trade agreements don't work in their interest. I know, and all of you know, that simply is
not so. But I also believe we ignore these views at our peril.
I said a moment ago, and I'll say it again, this organization, and the members of this
organization are in the rare position of having a sophisticated understanding of the importance of
engagement and leadership by this country in the global economy to our well-being, combined
with the ability to actually to do something with that understanding, to work with your
employees to promote a better understanding both with the American public and in Congress the
critical importance of our continuing to be effective leaders, continuing to be effectively
engaged. I think it is absolutely critical that you work to spread that message. I strongly urge that
you do so.
Let me close by saying that I believe we need to convey to all Americans that one of the great
lessons of the 20th century is that withdrawal from international affairs cannot work. When we
withdraw, we suffer; when we engage, we prosper. I thank you and I look forward to working
5
with all of you in the months ahead in this critically important area.
6
DEPARTMENT
lREASURY
OF
THE
TREASURY
NEWS
~/7~. . . . . . . . . . . .. .
. . . . . . . . . . . . . .
OFFICE OF PUBUC AFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960
Robert E. Rubin
Remarks for Opening Plenary
U.S.-China Joint Economic Committee
November 18, 1996
I would like to welcome all of you to this meeting of the U. S. -China Joint Economic
Committee.
As I look around the room, I see representatives from a broad range of agencies in our
government. This reflects a growing and increasingly complex economic relationship between
the United States and China -- as well as the importance President Clinton places on improving
relations between our two nations. And the first step toward improving relations is to improve
the level of understanding between us. Meetings such as this one are critical to that effort, just
as the G-7, APEC and other similar meetings provide better understanding amongst the
participants in those groups.
U.S.-China economic relations offer immense opportunities for both nations. The
United States and China are among the largest economies in the world; China's weight in the
global economy is growing year by year; and as that weight increases, our two nations will
almost inevitably have greater and greater economic impact on each other.
Our economic ties are already increasing at substantial rates. Bilateral trade has grown
at an average of 23 percent over the past five years alone, while U.S. direct investment into
China was some $5 billion in 1995.
Along with the opportunities which these growing links offer, difficult challenges
remain in strengthening our economic ties. We are fundamentally different in many respects,
with different approaches to economic development, macroeconomic management, and
business regulation.
And there are specific areas of disagreement between us. But, that is always true
between any two large nations. The key is not to let individual disagreements affect the overall
relationship, and to work constructively to resolve disagreements whenever possible. By
working together, and developing a deeper understanding of each other's economic views -both as to general economic policy and as to specific issues in which we may have differences
-- we can move forward in a pragmatic way in addressing the issues which face us.
RR-1377
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
As examples, for China, I believe that process will improve prospects for WTO accession -which the U. S. supports on commercially meaningful terms. For the United States, a key issue
is the magnitude of our bilateral trade deficit, and the policies that affect it.
The kind of dialogue we are having today and tomorrow is unique and particularly
valuable in the effort of building understanding.
Representatives of the U. S. and Chinese governments see each other often ,-- but
usually across a negotiating table or in the context of some kind of crisis that requires an
immediate solution. Rarely do we have the chance to sit down and discuss where our two
economies are going and the obstacles we each face, or to relate advice that we have gleaned
from our respective experiences: China, from its own remarkably successful experiences in
reforming its economy and, more broadly, from its Asian perspectives, and the United Sates
from its experiences with its own economy and in working with other countries involved in
economic transformation. Understanding is the basis for cooperation, and cooperation, in
turn, the basis for a sound relationship.
We have carved out an ambitious three-part agenda for the next two days. First, we
will have the opportunity to hear both sides review recent economic performance and
approaches to macroeconomic management, structural issues, and our bilateral trade balances.
Here in the U.S., we have achieved a six-year investment-led economic expansion with
low inflation -- the first since the 1960s -- made possible by substantial improvements by the
private sector in productivity and competitiveness, and by serious deficit reduction in the
public sector. And China has turned a corner in economic performance. China has had
fifteen years of remarkably high rates of growth and now has accomplished a soft landing in
1995, all of which bodes well as we move forward with the challenges that lie ahead.
The U. S. delegation is eager to discuss with China its next steps in introducing marketoriented forces into its economy.
Second, we will delve into financial market reform and supervision. Passage in China
of a central bank law and commercial bank law last year were milestones in the development
of China's banking sector, and we look forward to discussing the ramifications with our
colleagues from the People's Bank of China.
Finally, we will have an opportunity to get at some specific issues that don't fit into
other categories, for example, customs cooperation, certain tax matters, and financial crime -an area of cooperation endorsed by the APEC Finance Ministers Group.
This agenda offers a valuable opportunity for both nations -- both to learn and to
further bilateral cooperation. I urge members of both delegations to take full advantage of this
unusual opportunity in the two days of discussion before us.
2
Before I turn the podium over to my co-chair, Finance Minister Liu, I'd like to
introduce key members of the U. S. delegation who will be leading some of the discussions.
I would now like invite Minister Liu to make his opening statement.
3
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
November 18, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $14,131 million of 13-week bills to be issued
November 21, 1996 and to mature February 20, 1997 were
accepted today (CUSIP: 9127943Z5).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.01%5.03%'
5.03%-
Investment
Rate
5.14%5.16%'
5.16%-
Price
98.734
98.729
98.729
Tenders at the high discount rate were allotted 36%'.
The investment rate lS the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
5.02
-
RR-1378
98.731
Received
$52,542,229
Acce12ted
$14,131,009
$47,034,532
1,429,633
$48,464,165
$8,623,312
1,429,633
$10,052,945
3,528,664
3,528,664
549,400
$52,542,229
549,400
$14,131,009
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
November 18, 1996
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $14,111 million of 26-week bills to be issued
November 21, 1996 and to mature May 22, 1997 were
accepted today (CUSIP: 9127944K7).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.06%'
5.07%"
5.07%'
Investment
Rate
5.26%'
5.28%"
5.28%-
Price
97.442
97.437
97.437
Tenders at the high discount rate were allotted 37%".
The investment rate is the equivalent coupon-issue yield
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
RR-1379
Received
$50,760,469
Acce12 ted
$14,111,289
$42,768,495
1,176,674
$43,945,169
$6,119,315
1,176,674
$7,295,989
3,500,000
3,500,000
~,3l~,~QQ
$50,760,469
~,;n~,300
$14,111,289
DEPARTMENT
OF
THE
TREASURY
NEWS
'IREASURY
OFFICE OF PUBliC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIllNGTON, D.C.• 20220. (202) 622-2960
Statement
Press Conference
U.S.-China Joint Economk Committee
Secretal), Robert Rubin
November 19. 1996
J'd like to make a brief statement and then open it up for questions.
We have just concluded two days of highly valuable meetings with representatives of the
Chinese government through the U.S.-China Joint Economic Committee. These meetings have
provided rare opportunities to develop a better understanding of each other's economic views -both as to general economic policy and as to specific issues where we have differences. Two large
nations, such as China and the United States, having complex and dynamic economies -- and
increasingly linked economically -- will inevitably have disagreements over specific issues. The
key is not to let individual disagreements affect the overall relationship, and to work
constructively to resolve disagreements whenever possible. The prerequisite for resolving issues is
to understand each other's perspectives and our meetings today and yesterday were most useful
toward that end. The China/U.S. relationship would benefit greatly from frequent meetings of this
kind between officials of our two countries in many areas.
To give you just a few examples of the issues covered: We discussed general
macroeconoinic performance, including the U. S.' strong recent economic performance, and
China's remarkable 15 years of high rates of growth. We also discussed how each of us develops
and executes ollr respective budgets, and how that affects economic performance. We discussed
our bilateral trade imbalance, our common interest in cooperating in combating financial crime,
the free flow of market data in China, the low savings rate in the United States, China's new
approach to curb bank financing for money losing state enterprises, and our respective views on
human rights isslles in China.
We also agreed on some specific matters, which are listed in the communique, to carry our
relationship forward. For example, we agreed to move forward our discussions to conclude a
customs mutual assistance agreement. We agreed to intensify variolls forms of technical
RR-1380
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
DEPARTMENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
Statement
Press Conference
U.S.-China Joint Economk Committee
Secretary Robert Rubin
November 19,1996
I'd like to make a brief statement and then open it up for questions.
We have just concluded two days of highly valuable meetings with representatives of the
Chinese government through the U.S.-China Joint Economic Committee. These meetings have
provided rare opportunities to develop a better understanding of each other's economic views -both as to general economic policy and as to specific issues where we have differences. Two large
nations, such as China and the United States, having complex and dynamic economies -- and
increasingly linked economically -- will inevitably have disagreements over specific issues. The
key is not to let individual disagreements affect the overall relationship, and to work
constructively to resolve disagreements whenever possible. The prerequisite for resolving issues is
to understand each other's perspectives and our meetings today and yesterday were most useful
toward that end. The China/U.S. relationship would benefit greatly from frequent meetings of this
kind between officials of our two countries in many areas.
To give you just a few examples of the issues covered: We discussed general
macroeconoinic performance, including the U.S' strong recent economic performance, and
China's remarkable 15 years of high rates of growth. We also discussed how each of us develops
and executes our respective budgets, and how that affects economic performance. We discussed
our bilateral trade imbalance, our common interest in cooperating in combating financial crime,
the free flow of market data in China, the low savings rate in the United States, China's new
approach to curb bank financing for money losing state enterprises, and our respective views on
human rights issues in China.
We also agreed on some specific matters, which are listed in the communique, to carry our
relationship forward. For example, we agreed to move forward our discussions to conclude a
customs mutual assistance agreement. We agreed to intensify various forms of technical
RR-1380
Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
cooperation in taxation and in fighting financial crime. I was also vel)' encouraged from my
conversation with the Chinese authorities on the status of implementing the program for foreign
banks to conduct local currency business in Pudong, Shanghai. The authorities are now
considering applications and I was told that progress is expected to be made in the vel)' near
future. And we also agreed to consult on an ongoing basis with respect to financial market
development and access.
This is by no means an exhaustive list, but does illustrate the constructive dialogue in
which we have engaged over the last two days. Now our challenge is to sustain the spirit of
understanding and cooperation we· have had at this meeting of the JEC, and use the enhanced
understanding from this and other similar meetings to move forward on issues such as the trade
imbalance, to the extent it is a result of either Chinese or American policies; arriving at
commercially meaningful terms on which China can enter the World Trade Organization; and
financial market reform and supervision
To conclude, each of our nations has a great stake in a mutually beneficial economic
relationship, but that takes systematic hard work over the long run, both to increase our
understanding of each other's perspectives and to deal with individual issues. Now, I would be
happy to answer any CJuestions
-30-
2
COMMUNIQUE
Ninth Session of the U.S.-China
Joint Economic Committee
Washington, DC
November 19. 1996
At the invitation of Treasury Secretary Robert Rubin, Finance Minister Liu Zhongli led an
official delegation to the United States to co-chair the ninth session of the U.S.-China Joint
Economic Committee (JEC). The JEC provides an integrated framework for addressing
economic issues of mutual interest between the United States and the People's Republic of
China, and an opportunity for senior economic officials from both sides to exchange views.
In addition, Minister Liu and members of his delegation met with Vice President Al Gore.
The two Ministers noted the importance of building strong ties between two of the world's
major economies, particularly in the context of continued strong economic growth in both the
U.S. and China and increasing trade and investment flows. The two Ministers noted that a
flowering of the U.S.-China economic relationship should be encouraged by an improvement
in the overall U.S.-China relationship.
Discussions during the two-day meeting focused on:
•
Macroeconomic Policy and Performance -- the policies that have brought growth to
both countries and the challenges that lie ahead for each. For China, particular
attention was paid to the structural reforms needed to ensure the development of a
market-based system, while for the U.S., continued progress in reducing the federal
deficit, which has contributed to a favorable interest rate environment, was cited as a
key objective. The origins and issues related to the bilateral trade imbalance were
discussed.
•
Financial Market Reform and Supervision -- changes in banking and securities
markets, and the regulatory environment were reviewed. Establishing a more
efficient and competitive financial sector was seen as vital to more sustainable and
orderly economic development. China's efforts to deepen financial system reform and
strengthen financial regulation and supervision toward that end were discussed. On
. the U. S. side, particular attention was paid to changes in the banking sector -- prompt
corrective action and strengthening safety and soundness -- in line with the creation of
broader business opportunities for financial services providers.
•
Economic Cooperation -- discussion of cooperation in such areas as customs, tax
administration, and fighting financial crime. Discussion centered on the importance
of strengthening and broadening cooperation on technical areas that contribute to the
overall economic relationship.
In addition to discussion of important issues, progress was also made in deepening the U. S.China economic relationship and increasing bilateral cooperation. Secretary Rubin, on behalf
of the U.S. delegation, marked several achievements in this regard:
•
Noting the recent visit of SEC Chairman Levitt to Beijing, and the 1994
Memorandum of Understanding between the U.S. Securities and Exchange
Commission and the China Securities Regulatory Commission, Secretary Rubin
announced additional cooperation to develop programs addressing market oversight,
RR-1381
2
market disclosure and protection of investors -- in the context of China's efforts to
promote the development of sound and efficient capital markets.
•
Welcoming the progress that China has made in improving its tax system to date,
Secretary Rubin stated that the U. S. and China agreed to technical cooperation in
areas related to tax administration -- with a view to promoting revenue collection and
contributing to the business environment.
•
Secretary Rubin noted that China is working' to restructure its financial system and
strengthen financial supervision with a view toward bringing its consolidated
supervision in line with international standards. Achieving international standards· will
facilitate consideration by the U.S. authorities to allow Chinese banks to operate
branches within the U.S. under U.S. law.
•
Noting the APEC Finance Ministers' endorsement of cooperation in the fight against
financial crimes, the two sides agreed on enhancing cooperation in this area by
establishing normal channels of contact between designated institutions of both
countries. The two sides also agreed to increase the exchange of information, mutual
training, and technical cooperation.
Minister Liu, on behalf of the Chinese delegation, announced several developments:
•
Highlighting the significant strides China has taken to reform its foreign exchange
system and make the currency convertible on the current account, Minister Liu
announced China's plans to achieve current account convertibility by year's end.
•
Minister Liu announced that China is in the process of considering the applications of
foreign banks to conduct, on a trial basis, local currency business in Pudong,
Shanghai.
•
Minister Liu indicated that China will continue to phase in the participation of foreign
banks into the Chinese financial system in steps. He noted the recent decision to
approve applications for branch licenses from U.S. banks seeking to do business in
Beijing and Shanghai.
•
Highlighting the importance of cooperation and mutual assistance in customs matters,
Minister Liu announced that China's Customs Administration would move forward on
discussions with the U.S. Customs Service with a view toward concluding a customs
mutual assistance agreement.
The two Ministers welcomed closer government-to-government ties and encouraged the
exchange of visits between the economic agencies of the two countries. They also agreed to
hold the next session of the JEC in Beijing.
Participation on the U.S. side included representatives from the Treasury, the Federal
Reserve Board, the Securities and Exchange Commission, the Office of Management and
Budget, the Council of Economic Advisors, the Office of the U.S. Trade Representative, the
State Department, and the Department of Commerce. The Chinese delegation included
representatives from the Ministry of Finance, the People's Bank of China, the State Planning
3
Commission, the State Economic and Trade Commission, the Ministry of Foreign Affairs,
the Ministry of Foreign Trade and Economic Cooperation, the State Administration of
Taxation, the Customs General Administration, the State Administration of Foreign
Exchange, and the China Securities Regulatory Commission.
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Publlc Debt. Washington. DC 20239
FOR IMMEDIATE RELEASE
November 19, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF
2-Y~AR
NOTES
Tenders for $18,255 million of 2-year notes, Series AM-1998,
to be issued December 2, 1996 and to mature November 30, 1998
were accepted today (CUSIP: 9128272B7).
The interest rate on the notes will be 5 5/8\. All
competitive tenders at yields lower than 5.662% were accepted in
full. Tenders at 5.662\ were allotted 29%. All noncompetitive and
successful competitive bidders were allotted securities at the yield
of 5.662%, with an equivalent price of 99.931. The median yield
was 5.640%; that 1s, 50% of the amount of accepted competitive bids
were tendered at or below that yield. The low yield was 5.580%;
that is, 5% of the amount of accepted competitive bids were
tendered at or below that yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Receiyed
$38,440,269
Accepted
$18,254,594
The $18,255 million of accepted tenders includes $928
million of noncompetitive tenders and $17,327 million of
competitive tenders from the public.
In addition, $1,950 million of
high yield to Federal Reserve Banks
international monetary authorities.
of tenders was also accepted at the
Reserve Banks for their own account
securities.
RR-13B2
tenders was awarded at the
as agents for foreign and
An additional $285 million
high yield from Federal
in exchange for maturing
NEWS
ornCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W .• WASHINGTON, D.C.. 20220. (202) 622·2960
EMBARGOED UNTIL 2:30 P.M.
November 19, 1996
CONTACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treqsury will auction two series of Treasury bills
totaling approximately $28,000 million, to be issued November 29,
1996. This offering will provide about $1,875 million of new cash
for the Treasury, as the maturing weekly bills are outstanding in
the amount of $26,119 million.
Federal Reserve Banks hold $7,435 million of the maturing
bills for their own accounts, which may be refunded within the
offering amount at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $5,980 million as agents for
foreign and international monetary authorities, which may be
refunded within the offering amount at the weighted average
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.
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 (31 CFR Part 356) for the sale and issue by the
Treasury to the public of marketable Treasury bills, notes, and
bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment.
RR-1383
z
o
<
I
...
HIGHLIGHTS OF TREASURY OFPERINGS OF WEEKLY BILLS
TO BE ISSUED NOVEMBBR 29, 1996
November 19, 1996
Offering Amount
$14,000 million
$14,000 million
Description of Offering:
Term and type of security
CUSIP number
Auction date
Issue date
Maturity date
Original issue date
Currently outstanding
Minimum bid amount
Multiples .
SO-day bill
912794 4A 9
November 25, 1996
November 29, 1996
February 27, 1997
August 29, 1996
$12,067 million
$10,000
$ 1,000
1S1-day bill
912794 2Q 6
November 25, 1996
November 29, 1996
May 29, 1997
May 3D, 1996
$19,327 million
$10,000
$ 1,000
The following rules
Submission of Bids:
Noncompetitive bids
~pply
Competitive bids
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10\.
(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 pos~tion 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 Award . .
35\ of public offering
~¥l!!.~nt
Terms
-I
C
rT1
...
N
"
N
I!J
r
~
r
35\ of public offering
Competitive tenders
(T\
-I
-I
to all securities mentioped above:
Maximum Recognized Bid
at a Single Yield
Receipt of Tenders:
Noncompetitive tenders
I!J
I
I!J
Prior to 12:00 noon Eastern Standard time
on auction day
Prior to 1:00 p.m. Bastern Standard time
Fu11 payment with tender or by charge to a
funds
~~c!<>'-1r1.t:.
da.~e
.at.
Pedex-.aa1
Re-SEJ::r-'V'"43
Bank
C>~
:::l9R1.~~
;l)
o
(j
7\
1l
on auction day
.a.I=:
rT1
(p
to)
u 1<..
P A K ~T
MEN T
0 F
THE
T REA SUR Y
NEWS
'IREASURY
OFFlCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASHINGTON, D.C .• 20220 • (202) 622-2960
FOR RELEASE AT 1 PM EST
November 20, 1996
Statement by Treasury Secretary Robert E. Rubin
I fully support the action today by the Comptroller of the Currency to approve a final
version of Part 5 of the OCC's regulations. It provides an orderly, prudent and public process
for the OCC to decide on applications for bank operating subsidiaries that seek to offer new
financial products and services that are incidental to banking, while at the same time
establishing prudential safeguards to protect the bank from additional risk. This rule
streamlines the application process for banks seeking to make changes in their organizational
structure, while at the same time increasing opportunities for public participation in decisions
on the most significant applications.
Allowing banks to diversify their financial service activities will reduce risk and
strengthen the banking system over the long term, while promoting competition that lowers
costs for consumers and makes financial products and services more widely available. The
revised rule establishes a regulatory process that permits banks to keep pace with marketplace
developments in a safe and sound manner within the bounds of existing law.
-30RR-1384
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
November 20, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY.'S AUCTION OF 5-YEAR NOTES
Tenders for $12,504 million of 5-year notes, Series Q-2001,
to be issued December 2, 1996 and to mature November 30, 2001
were accepted today (CUSIP: 9128272C5).
The interest rate on the notes will be 5 7/8%. All
competitive tenders at yields lower than 5.950% were accepted in
full.
Tenders at 5.950% were allotted 42%. All noncompetitive and
successful competitive bidders were allotted securities at the yield
of 5.950%, with an equivalent price of 99.680. The median yield
was 5.910%; that is, 50% of the amount of accepted competitive bids
were tendered at or below that yield.
The low yield was 5.850%;
that is, 5% of the amount of accepted competitive bids were
tendered at or below that yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Received
$35,820,785
Accepted
$12,504,325
The $12,504 million of accepted tenders includes $310
million of noncompetitive tenders and $12,194 million of
competitive tenders from the public.
In addition, $1,320 million of
high yield to Federal Reserve Banks
international monetary authorities.
of tenders was also accepted at the
Reserve Banks for their own account
securities.
RR-13B5
tenders was awarded at the
as agents for foreign and
An additional $190 million
high yield from Federal
in exchange for maturing
20009
From: TREASURY PUBLIC AFFAIRS
f)
L P .\ R I \1 F :\ I
() F
r
H I·
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p. 1 of 99
T I{ L \ S l R \
NEWS
omCE OF PUBUC AFl'AIRS 11500 PENNSYLVANIAAVENUE, N.W. 1 WASlUNGTON. D.C. 1 20220 • (202) 621-2960
FOR IMMEDIATE RELEASE
CONT ACT: Darren McKinney
November 26, 1996
(202) 622-2960
CLINTON PRESENT AT SIGNING OF U.S.-THAI INCOl\1E TAX CONVENTION
The Treasury Department today announced that President Clinton observed the signing of
an income tax convention by U.S. Ambassador to Thailand William Itoh and Thai Foreign
Minister Amnuay Viravan in Bangkok. This is the first income tax convention between the
United States and Thailand and is an important achievement in the Administration's broad
strategy of expanding the U. S. tax treaty network with major trading partners in Southeast Asia.
The Convention will enter into force after the countries have exchanged the instruments of ratification.
"Today's signing reminds us that governments do not create wealth, but governments can
create the climate in which our workers, our entrepreneurs, our investors and business people can
have a free and unfettered opportunity to thrive," said President Clinton.
The proposed Convention generally follows the pattern of the U.S. Model treaty,
provisions of which have been included in many recent u.s. treaties with other developing
countries. There are, however, variations that reflect particular aspects of Thai treaty policy,
additional accommodations for US. and Thai law, and U.S.-Thai economic relations.
Rate Provisions
Although the withholding rates under the proposed Convention are generally higher than
those in the US. Model and in many recent US. treaties with OECD countries, the proposed
rates are generally lower than those in many recent Thai treaties.
Under the proposed Convention, direct investment dividends are subject to taxation at
source at a IO-percent rate, and portfolio dividends are taxable at a I5-percent rate. The proposed Convention requires a lO-percent ownership threshold for application of the la-percent tax
rate
The proposed Convention provides for a maximum IS-percent rate of tax at source on
most interest payments. However, interest paid by any financial institution, including an insurance
company, and interest earned on trade credits is limited to a la-percent rate of tax at source. In
addition, interest earned on government debt, including debt guaranteed by government agencies
(e.g, the U.S. Export-Import Bank) is exempt from tax at source.
RR-1386
For press rele4fes,
(more)
speeches, pubkc schedules and official biographies, call our 24-hour fax line at (202) 622-2040
0:
From: TREASURY PUBLIC AFFAIRS
20009
1-15-97 4:50pm
p. Z of 99
-2-
Copyright royalties (including software) are subject to a 5-percent tax at source.
Royalties for the right to use equipment are subject to an 8-percent tax at source. Royalties for
patents and trademarks are subject to a I5-percent tax at source.
Standard U.S. anti-abuse rules are provided for certain classes of investment income.
Dividends paid by non-taxable conduit entities, such as U.S. Regulated Investment Companies
and Real Estate Investment Trusts, are subject to special rules to prevent the use of these entities
to transform what is otherwise high-taxed income into lower-taxed income. Excess inclusions
with respect to residual interests in Real Estate Mortgage Investment Conduits are denied the
benefits of the reduced rate of tax at source on interest.
Allowances similar to those under some US. treaties with developing countries are made
for taxation of income from the performance of personal services. But the proposed Convention
grants a taxing right to the host country that is broader than that in the OEeD or US. Models.
Capital Gains
The taxation of capita! gains under the proposed Convention does not foHow the normal
pattern. Like a few other treaties, it allows gains to be taxed by both countries under the
provisions of their respective internal law .
As with recent U.S. treaties and the US. and OECD Models, the proposed Convention
provides generally for the taxation by the first country of the business profits of a resident of the
second only when such profits derive from a permanent establishment located within the fIrst
country. The proposed Convention, however, grants rights to tax business profits that are
somewhat broader than those found in the U.S. and OEeD Models.
The proposed Convention preserves the US. right to impose its branch tax on u.s.
branches of Thai corporations. The proposed Convention will also accommodate a provision of
the 1986 Tax Reform Act that attributes to a permanent establislunent any income earned during
the life of the permanent establishment, but deferred and not received until after the permanent
establishment has ceased to exist.
Air Carriers and Shipping
The proposed Convention, consistent with current U.S. treaty policy, provides for
exclusive residence-country taxation of profits from international carriage by aircraft. This
reciprocal exemption also extends to income from the rental of aircraft if the rental activity is
incidental to the operation of aircraft by the lessor in international traffic. However, income from
the international operation of ships (including rentals that are incidental to such operations) is
taxed at one-half of the tax rate otherwise applicable. Income from the use or rental of containers
that is incidental to the operation of ships or aircraft in international traffic is treated the same as
the income from the operation of the ships or aircraft (i.e., it is exempt if incidental to aircraft
operations, and taxed at half of the rate otherwise applicable if incidental to the operations of
ships). This deviation from the preferred U. S. position regarding the taxation of shipping profits,
which is suggested as an option in the U.N. Model, was necessary to accommodate Thailand's
fong-standing policy on this issue.
(more)
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From: TREASURY PUBLIC AFFAIRS
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p. 3 of 99
-3-
The United States and Thailand have agreed to exchange notes under which, if Thailand
grants any other country more favorable treatment on income from the operation of ships in
international traffic. then negotiations will be reopened to extend such favorable treatment to the
United States. Other income from the rental of ships or aircraft and from the use or rental of
containers is treated as business profits under Article 7. As such, these classes of income are
taxable only in the country of residence of the beneficial owner of the income unless the income is
attributable to a permanent establishment in the other country. in which case it is taxable in that
country on a net basis.
Administration and Oversight
Information exchange provisions make clear that Thailand is obligated to provide U.S. tax
officials such infonnation as is necessary to carry out the provisions of the Convention. U.S.
negotiators are satisfied that, under this provision and under the existing Mutual Legal Assistance
Treaty between the two countries, Thailand will be able to provide adequate tax infonnation,
including bank information, relevant to criminal cases that may be pursued by u.s. authorities.
Additionally, under this provision and in accordance with present Thai law, Thailand will be able
to provide adequate tax information, including bank information, to U.S. authorities in a1l civil
cases in which a Thai tax interest exists.
The proposed Convention contains an unusual provision regarding exchange of information, designed to deal with this "tax interest" problem. The proposed Convention provides that
Thailand generally is required to treat aU. S. tax interest as a Thai tax interest in all cases,
including both civil and criminal tax proceedings. However, this general provision will not be in
effect until the United States receives from Thailand a diplomatic note indicating that Thailand is
both prepared and able to implement this provision, which will not be possible until Thai law is
changed. If the United States has not received such a diplomatic note by June 30 of the fifth year
following entry into force of the Convention, the entire Convention will terminate on January 1 of
the sixth year following its entry into force.
The proposed Convention also contains significant rules, known as the "Limitation on
Benefits" article, designed to restrict the benefits of the Convention to persons not engaged in
"treaty shopping." The provisions are similar to those found in the U.S. Model and in all recent
u.S. treaties.
The proposed Convention provides a US. foreign tax credit for the Thai income taxes
covered by the Convention, and a Thai foreign tax credit for the US. i~ome taxes covered by the
Convention. However, US. rules regarding "dual capacity" taxpayers apply in determining the
extent to which the Thai Petroleum Income Tax will be considered an income tax for U.S. foreign
tax credit purposes. This is clarified in the exchange of notes. The notes also provide that if the
United States alters its long-standing against the granting of "tax sparing credits," or provides for
such credits in another treaty, negotiations will be reopened with a view to concluding a protocol
that would offer similar benefits to Thailand.
Furthermore, the proposed Convention provides for non-discriminatory tax treatment (i.e.,
national treatment) by one country of residents and nationals of the other. Also included in the
proposed Convention are additional rules necessary for its administration, including rules for the
resolution of disputes.
(more)
: 20009
From: TREASURY PUBLIC AFFAIRS
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p. 4 of 99
-4-
And the proposed Convention allows the General Accounting Office and the tax writing
Committees of Congress to obtain access to certain tax information exchanged under the
Convention for use in their oversight of the administration of U.S. tax laws and treaties.
Ratification
The proposed Convention is subject to ratification. It will enter into force upon the
exchange of instruments of ratification. It will have effect, with respect to taxes withheld at the
source, for amounts paid or credited on or after the first day of the sixth month following entry
into force. In other cases the COfivenl~on will have effect with respect to taxable periods beginning on or after the first day of January following the date on which the Convention enters into
force.
The Convention will remain in force indefinitely unless terminated by either country.
Either country will be able to terminate the Convention after 5 years from the date on wruch the
Convention enters into force by giving at least six months prior notice through diplomatic
channels.
Copies of the new Convention are available from the Office of Public Affairs, Treasury
Department, Room 2315, Washington, D.C. 20220.
-30-
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
November 25, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $14,051 million of 13-week bills to be issued
November 29, 1996 and to mature February 27, 1997·were
accepted today (CUSIP: 9127944A9).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.02%"
S.03%"
5.03%-
Investment
Rate
5.15%"
5.16%"
5.16%-
Price
98.745
98.743
98.743
Tenders at the high discount rate were allotted 59%.
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
RR-1387
Received
$63,077,619
Acce12ted
$14,050,577
$57,417,936
1,353,803
$58,771,739
$8,390,894
1,353,803
$9,744,697
3,735,180
3,735,180
~:ZQ,:ZQQ
~:ZQ,:ZQQ
$63,077,619
$14,050,577
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
November 25, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $14,063 million of 26-week bills to be issued
November 29, 1996 and to mature May 29, 1997 were
accepted today (CUSIP: 9127942Q6)
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.05%5.07%'
5.07%'
Investment
Rate
5.25%5.27%
5.27%"
Price
97.461
97.451
97.451
Tenders at the high discount rate were allotted 32%".
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
5.06 - 97.456
RR-1388
Received
$50,434,723
Accepted
$14,062,534
$42,089,525
1,055,398
$43,144,923
$5,717,336
1,055,398
$6,772,734
3,700,000
3,700,000
3,589,800
$50,434,723
3,589,800
$14,062,534
D E P :\ R T l\1 E N T
0 F
THE
'IREASURY!W}
T REA SUR Y
NEW S
1789
OmCE OF PUBUC AFFAIRS -1500 PENNSYLVANlAAVENUE, N.W. - WASI-nNGTON. D.C. _ 20220 _ (202) 622-2960
EMBARGOED UNTIL 2: 30 P. M.
November 26, 1996
CONTACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $28,000 million, to be issued December S,
1996. This offering ~ill provide about $1,150 million of new cash
for the Treasury, as the maturing weekly bills are outstanding in
the amount of $26,838 million.
Federal Reserve Banks hold $7,203 million of the maturing
bills for their own accounts, which may be refunded within the
offering amount at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $4,106 million as agents for
foreign and .international monetary authorities, which may be
refunded within the offering amount at the weighted average
diacount rate of accepted competitive tenders. Additional amounts
may be issued for such accounts if the aggregate amount of new
bid. exceeds the aggregate amount of maturing bills.
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 (3l CFR Part 356) for the sale and issue by the
Treasury to the public of markecable Treasury bills, notes, and
bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
RR-13B9
HIGHLIGHTS OF TREASURY OPFBRINGS OF WBBXLY BILLS
TO BB ISSUED DBCBMBBR 5, 1996
'It
~
November 26, 1996
a.
Offering Amount .
DeBcription of Offeringl
Term and type of security
CUSIP number
Auction date
Issue date
Maturity date
Original issue date
CUrrently outstanding
Minimum bid amount
Mul t iplea . .
$14,000 million
$14,000 million
91-day bill
912794 2M 5
December 2, 1996
December 5, 1996
March 6, 1997
March 7, 1996
$30,916 million
$10,000
$ 1,000
182-day bill
912794 4L 5
December 2, 1996
December 5, 1996
June 5, 1997
December 5, 1996
$10,000
$ 1,000
The following rules apply to all securitie. mentioned abov,s
~
(J
o
cr:
Submission of Bids:
Noncompetitive bids
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10\.
(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 $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 ..
Competitive bids
W
.J
~
~
~
.J
r9'4
,..
M
9'4
w
:)
~
IJ)
(1l
I
Maximum Eecognized Bid
at a Single Yield
35% of public offering
Maximum Award .
35% of public offering
•
o
)
.
. .
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders
IJ)
N
.
Payment Tenna .
Prior to 12:00 noon Eastern Standard time
on auction day
Prior to 1:00 p.m. Eastern Standard time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
D E P :\ R T 1\1 E N T
IREASURY
0 F
THE
T REA SUR Y
ra} NEW S
178q
OFFlCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE. N.W .• WASI-llNGTON. D.C .• 20220. (202) 622-2960
EMBARGOED UNTIL 2: 30 P. M_
November 26, 1996
CONTACT;
Office of Financing
202/219-3350
TREASURY TO AUCTION CASH MANAGEMENT BILLS
The Treasury will auction approximately $9,000
million of 14-day Treasury cash management bills to be
issued December 3, 1996.
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 ~ 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 average price of
accepted competitive tendersThis offering of Treasury securities is governed by
the terms and conditions set forth in the Uniform Offering
Circular (31 CFR Part 356) for the sale and iSBue by the
Treasury to the public of marketable Treasury bills, notes,
and bonds.
Details about the new security are given
attached offering highlights.
000
Attachment
RR-1390
~n
the
NOV-26-96
TUE
13:15
LITTLE
ROCK
P_02
HIGHLIGHTS OF TREASURY OFFERING
OP 14-DAY CASH MANAGEMENT BILL
November 26, 1996
Offering Amount . . . . .
Description of Offering:
Term and t~ of security
CUSIP number
Auction date
Issue date
Maturity date
Original issue date .
Currently outstanding
Minimum bid amount
Multiples . . . . . .
Minimum to hold amount
Multiples to hold
.
$9,000 million
. 14-day cash Management Bill
912794 6X 7
2, 1996
3, 1996
17, 1996
3, 1996
December
· December
December
· December
$10,000
· $1,000
· $10,000
. $1,000
SubMission of Bids:
Noncompetitive bids
Competitive bids
Recognized Bid
at a Single Yie~d
Accepted in full up to $1,000,000 at
the average discount rate of accepted
competitive bids
(1) Must be expressed as a discount rate
with two decimals, e.g., 7.10%.
(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 $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.
Max~um
Maximum Award .
.
. .
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders
Payment
Te~s
35% of public offering
35% of public offering
Prior to 11:00 a.m. Eastern Standard
time on auction day
Prior to ll:30 a.m. Eastern Standard
time on auction day
. . . . . . . Full payment with tender or by charge
to a funds account at a Federal
Reserve Bank on issue date
o
<0
federal financing
WASHINGTON, D.C. 20220
banlcNEWS
November 27,1996
FEDERAL FINANCING BANK
Charles D. Haworth, Secretary, Federal Financing Bank (FFB),
announced the following activity for the month of October 1996.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $61.0 billion on October 31, 1996,
posting a decrease of $995.0 million from the level on
September 30, 1996. This net change was the result of a decrease
in holdings of agency debt of $1,000.0 million, and an increase
in agency guaranteed loans of $5.0 million.
FFB made 21
disbursements during the month of October.
FFB also received 11
prepayments in October.
Attached to this release are tables presenting FFB October
loan activity and FFB holdings as of October 31, 1996.
RR-1391
0
0)
10
N
N
N
N
<0
N
o
N
(/)
(/)
~
.r
N
N
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N
0
N
CD
u.
a.. u.
Page 2 of 3
FEDERAL FINANCING BANK
OCTOBER 1996 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
AGENCY DEBT
RESOLUTION TRUST CORPORATION
*Note 29 /Advance #1
u.s.
u.S.
u.S.
u.S.
u.S.
u.S.
u.S.
u.S.
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Service
Service
Service
Service
Service
Service
Service
Service
10/1
10/4
10/4
10/7
10/18
10/21
10/21
10/21
10/22
$5,996,170,158.06
$170,000,000.00
$170,000,000.00
$21,900,000.00
$80,100,000.00
$110,100,000.00
$50,000,000.00
$200,000,000.00
$77,100,000.00
1/2/97
5.178% S/A
10/8/96
10/9/96
10/8/96
10/21/96
10/22/96
10/23/96
10/22/96
10/23/96
5.165%
5.165%
5.364%
5.361%
5.395%
5.236%
5.236%
5.405%
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
30VERNMENT - GUARANTEED LOANS
GENERAL SERVICES ADMINISTRATION
Chamblee Office Building
Foley Square Courthouse
Foley Services Contract
Foley Services Contract
Foley Services Contract
Foley Square Office Bldg.
Foley Square Courthouse
10/2
10/2
10/2
10/8
10/25
10/25
10/31
$90,685.32
$326,312.00
$178,461.24
$232,505.22
$185,286.26
$478,051.00
$324,257.00
4/1/97
7/31/25
7/31/25
7/31/25
7/31/25
7/31/25
7/31/25
5.471%
7.005%
7.005%
6.898%
6.958%
6.958%
6.789%
10/16
$7,958,248.81
11/2/26
6.957% S/A
10/1
10/15
10/18
10/18
10/24
$258,000.00
$400,000.00
$1,324,000.00
$1,050,000.00
$3,172,000.00
12/31/26
1/3/17
6/30/97
12/31/25
1/2/07
7.007%
6.788%
5.481%
6.783%
6.577%
GSA/PADC
rCTC Building
RURAL UTILITIES SERVICE
Head Laker Electric #372
E. Nebraska Tele. #398
Farmers Telephone #399
Randolph Electric #359
Central Electric Pow #331
S/A is a semi-annual rate: Qtr. is a Quarterly rate.
naturity extension or interest rate reset
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 3 of 3
FEDERAL FINANCING BANK
(in millions)
Net Change
Program
Agency Debt:
Export-Import Bank
Resolution Trust Corporation
u.s. Postal Service
sub-total·
October 31, 1996 September 30, 1996
10/1/96-10/31/96
FY '97 Net Change
10/1/96-10/31/96
$
$ 1,821.8
$ 1,821.8
5,996.2
500.0
8,317.9
5,996.2
1. 500. 0
9,317.9
0.0
0.0
-1.000.0
-1,000.0
0.0
0.0
-1.000.0
-1,000.0
Agency Assets:
FmHA-RDIF
FrnHA-RHIF
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Rural Utilities Service-CBO
Small Business Administration
sUb-total*
3,675.0
18,700.0
5.5
18.8
4,598.9
0.1
26,998.3
3,675.0
18,700.0
5.5
18.8
4,598.9
0.1
26,998.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Government-Guaranteed Loans:
DOD-Foreign Military Sales
DoEd-HBCU
DHUD-Cornmunity Dev. Block Grant
DHUD-Public Housing Notes
General Services Administration +
DOl-Virgin Islands
DON-Ship Lease Financing
Rural utilities Service
SBA-State/Local Development Cos.
DOT-Section 511
sub-total*
3,244.5
0.2
37.8
1,626.8
2,342.0
19.9
1,382.8
16,753.3
315.0
12.7
25,735.0
3,247.2
0.2
39.1
1,626.8
2,332.3
19.9
1,382.8
16,750.7
318.4
12.7
25,730.0
=========
-2.7
0.0
-1. 4
0.0
9.8
0.0
0.0
2.6
-3.4
0.0
5.0
-2.7
0.0
-1.4
0.0
9.8
0.0
0.0
2.6
-3.4
0.0
5.0
=========
$ 62,046.2
grand-total*
*figures may not total due to rounding
+does not include capitalized interest
$ 61,051.3
$
=========
$
-995.0
$
-995.0
DEPAR1~1ENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASlllNGTON, D.C. • 20220. (202) 622·2960
EMBARGOED UNTIL 12:00 NOON
November 29, 1996
CONTACT:
Office of Financing
202/219-3350
TREASURY'S 52-WEEK BILL OFFERING
The Treasury will auction approximately $19,250 million
of 52-week Treasury bills to be issued December 12, 1996. This
offering will provide about $450 million of new cash for the
Treasury, as the maturing 52-week bill is currently outstanding
in the amount of $18,792 million. In addition to the maturing
52-week bills, there are $26,679 million of maturing 13-week and
26-week bills.
Federal Reserve Banks hold $13,015 million of bills for
their own accounts in the maturing issues. These may be refunded
at the weighted average discount rate of accepted competitive
tenders.
Federal Reserve Banks hold $4,794 million of the maturing
issues as agents for foreign and international monetary authorities. These may be refunded within the offering amount at the
weighted average 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. For purposes of determining such additional
amounts, foreign and international monetary authorities are
considered to hold none of the maturing 52-week issue.
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 (31 CFR Part 356) for the sale and issue by
the Treasury to the public of marketable Treasury bills, notes,
and bonds.
Details about the new security are given in the attached
offering highlights.
000
Attachment
RR-1392
For press releases, speeches, public schedules and official biographies, call our 24~our fax line at (202) 622.2040
From: TREASURY PUBLIC AFFAIRS
20009
1-15-97 4:53pm
p. 5 of 99
Monthly Report
by the
Secretary of the Treasury
Pursuant to the
Mexican Debt Disclosure Act
of 1995
Contents
Page 1
I.
Overview
II.
Current Condition of Mexico's Economy
3
III.
Mexico's Financial Transactions
8
IV.
Disbursements, Swaps, Guarantees and Compensation
to the U.S. Treasury
8
Status of the Oil Facility
9
v.
November 1996
RR-l393
From: TREASURY PUBLIC AFFAIRS
20009
1-15-97 4:53pm
p. B of 99
Treasury Secretary's Repon to Congress
November 1996
I.
Overview
In providing assistance to Mexico under the February 21. 1995 Agreements, the U.S.
government acted to protect vital U.S. interests: American exports and jobs. the
security of our common border, and the stability of other emerging market economies.
U.S. and other international support in 1995 allowed Mexico to implement the policies
necessary to avert default, regain access to international capital markets, and restore the
basis for susuiuaLiz growth.
Mexico's economic recovery continued as real GDP grew by 7.4 % in the third quarter
compared to a year earlier. following 7.2% real GDP growth in the second quarter.
Both the Mexican government and private analysts expect solid growth to continue next
year. In presenting its 1997 budget, the government forecast real GDP growth of 3.7 %
for all of 1996 and 4 % for 1997. In an October survey by Consensus Economics,
private analysts forecast real GDP growth of 4.2% in 1997.
Mexico's financial markets strengthened in November, with the stock market rising 1.8%
through November 26 and Brady Par bond stripped spreads tightening 58 basis points.
The peso was broadly stable in November, appreciating to p7.87 per dollar on
November 26 from p7.96 on October 31. Interest rates on the benchmark 28-day cetes
fell 26 basis points from late October, to reach 29.1 % in the November 26 auction; oneyear interest rates fell more than two hundred basis points to 26.5%, as the yield curve
became more inverted.
Monetary and fiscal policy continue to be solid. During the first nine months of 1996,
Mexico registered an overall public sector surplus of p19.6 billion, more than 1 % of
that period's GDP. Through the first three quarters of 1996, fiscal results were within
government targets and the growth of monetary aggregates also remained well within
the Bank of Mexico's targets. The government is projecting a small budget surplus in
1996 and a budget deficit of 0.5% of GDP in 1997. Restrained monetary policy has
helped Mexico to achieve a path of steady disinflation, with October's monthly inflation
rate at 1.25%, the lowest rate since December 1994. Inflation in November and
December is expected to be somewhat higher due to seasonal fat'ors.
On the external side, the Mexican government and its agencies continued to attract
international capital and have raised almost $16 billion in 1996 to date. In November,
Mexico placed 500 billion lire (about $325 million) in five-year floating-rate notes,
priced at 210 basis points over LIBOR. Mexico's trade balance registered a surplus of
$277 million in October (preliminary), bringing the cumulative 1996 surplus through
October to $5.8 billion. During the first ten months of 1996, exports and imports rose
19.9% and 22.5%, respectively, over the same period in 1995. Fueled by the resumption
of Mexican growth, U.S. exports to Mexico continue to run at record levels this year.
20009
From: TREASURY PUBLIC AFFAIRS
1-15-97 4:54pm
p. 7 of 99
Treasury Secretary's Report to Congress
November 1996
Mexico has met all payment obligations to date under the U. S. fmancial support
program. Including the August 1996 prepayment of $7 billion, Mexico has repaid a
net $9 billion in outstanding short- and medium-term swaps to the Treasury and
Federal Reserve. Thus, Mexico has repaid nearly three-quarters of its debt to the
U.S., well ahead of schedule. It has also made interest payments totaling $1.36 billion,
including a $68 million payment on September 30.
Mexico's $3.5 billion in remaining obligations to the U.S. under the February 21, 1995
Agreements continues to be fully backed by proceeds from Mexico's crude oil, oil
products, and petrochemical product exports. Payments for these exports flow through
a special account at the Federal Reserve Bank of New York. As of November 20,
$14.3 billion had passed through this account.
2
1-15-97 4:55pm
From: TREASURY PUBLIC AFFAIRS
20009
p. 8 of 99
Treasury Secretary's Report to Congress
November 1996
II.
Current Condition of Mexico t s Economy
a.
Economic Activity
Mexico's economic recovery continued in the third quarter of 1996
•
H.c ... l C:C? rose 7.4% in the third quarter on a year-over-year (y/y) basis, following
7.2% (y/y) growth in the second quarter. In the first nine months, GDP rose 4.4%
over the same period in 1995.
Gross Domestic Product
(1993 basis; y/y comparison)
GDP
1995
1996Ql
1996Q2
1996Q3
-6.2
-1.0
7.2
7.4
Recent indicators of domestic demand and production suggest solid economic growth
•
Industrial production rose 9.8% in the first nine months of 1996, compared to the
same period in 1995.
•
Domestic vehicle sales in October rose 56% compared to September and were at
their highest level since December 1994. Sales in 1996 through October were up
76% from comparable 1995 levels, but were still down significantly from 1994.
Continued growth expected in 1997
•
A survey of private analysts in October's Consensus Economics showed an
average forecast of 4.1 % real GDP growth in 1996, cOlRpared to the forecast of
2% at the beginning of the year.
•
In its November presentation of the 1997 economic program, the government
projected real GDP growth of 4%; an October survey by Consensus Economics
forecast 4.2% growth.
3
From: TREASURY PUBLIC AFFAIRS
20009
1-15-97 4:55pm
p. 9 of 99
Treasury Secretary IS Report to Congress
November 1996
Trade balance in surplus through October
Mexico's trade balance in October (preliminary) registered a $277 million surplus.
During the first ten months of 1996, exports and imports rose 19.9% and 22.5%,
respectively, over the same period in 1995.
•
For t:':c r:.~t ten months of 1996, the trade surplus was $5.8 billion, $307 million
lower than the surplus for the first ten months of 1995.
•
Higher oil prices and export volumes contributed to the 1996 trade surplus. Oil
export revenues in 1996 through October were $9.5 billion, compared to $7.2
billion over the same period last year.
•
U.S. exports to Mexico rose to a record high in the first nine months of 1996,
increasing by 19.1% compared to the same period in 1995, and by 8.5% compared
to the same period in 1994.
Labor markets show improvement
•
The open unemployment rate (not seasonally adjusted), a narrow rate of
joblessness in the urban fonnal sector. was at 5.2% in October, down from 5.5%
in September and was at its lowest rate since January 1995. Without seasonal
influences, the unemployment rate in October would have been lower.
•
Employment in the fonnal sector, as measured by the number of workers in the
social security system, was at an all-time high in October, and was up 7.4% from
October 1995.
II.
b.
Monetary and Fiscal Policy
Monetllry policy remains on track
•
Since January 1 of this year, base money has fallen about 2%, to P65.5 billion
on November 22. Over the past twelve months, base money has risen 22.1 %,
compared to a 28 % inflation rate over that period. Money growth remains
consistent with the BOM's 1996 monetary program.
4
1-15-97 4:56pm
From: TREASURY PUBLIC AFFAIRS
20009
p. 10 of 99
Treasury Secretary's Repon to Congress
November 1996
•
In 1996, net domestic credit, defmed as the monetary base less international
reserves, has fallen by p37 billion while net international reserves (IMF
defInition) have increased by $4.5 billion.
Mexico maintains budget surplus in the third quarter of 1996; Mexico announces
fiscal policy will remain firm in 1997
The budget registered an overall surplus of p5.1 billion (0.9% of GOP) in the third
quarter of 1996, bringing the cumulative surplus to p19.6 billion (1.1 % of GDP) for
the fIrst three quarters of 1996.
•
In its November presentation of its 1997 program, the government announced
that it expects an overall surplus ofpO.3 billion (0.01 % of GOP) in 1996,
consistent with its 1996 balanced budget target.
For 1997, the Mexican government projected a budget deficit of 0.5% of GOP.
Included in its projection are the increased costs and revenue losses generated by social
security reforms and debtor support programs, which are expected to cost about 1 % of
GOP. Pension reforms scheduled to take effect next July will help boost national
savings.
1997 Public Finances
(changes in expenditures and revenues as % of GDP)
% ofGDP
Overall Public Budget
+0.37%
+0.31 %
-0.29%
+0.35%
Expenditure:
Social security reform
Programmable cut
Debtor support program
Revenue:
Compliance and public price increases
Social security reform
."
+0.16%
+0.52%
-0.36%
Other expenditure and revenue effects
-0.30%
Total
-0.51 %
5
From: TREASURY PUBLIC AFFAIRS
20009
1-15-97 4:55pm
p. 11 of 99
Treasury Secretary's Report to Congress
November 1996
Inflation continues to recede
•
Monthly inflation registered 1.25% in October. the lowest rate since December
1994. Inflation for the frrst half of November was 0.9%. November and
December inflation is expected to rise due to seasonal reasons.
II.
c.
Financial Sector Developments
Restructuring continues in the banking system
•
On November 13, Banco Atlantico reached an agreement with the Banking
Commission to sell p2 billion in loans to FOBAPROA, the central bank insurance
fund; in return, Atlantico's shareholders will inject pI billion in additional
capital.
Non-per/orming loans decline slightly, but remain high
•
The level of non-performing loans for the entire private banking system,
including those of the intervened banks but excluding loans sold to FOBAPROA,
were 12.0% in September, down from 12.7% in August.
II.
d.
Financial Markets
The peso appreciated, while the yield curve became more inverted
•
The peso rose 1.1 % through November 26 from its October 31 close of p7 .96,
closing at p7. 87 to the dollar.
As of end-October, the real (inflation-adjusted) exchange rate had
appreciated about 17.7% against the dollar fr6ln its end-I99S level. The
peso was still about 20.8% below its pre-devaluation (November 1994)
level in real terms.
•
The November 26 primary auction resulted in 28-day cetes yields of 29.08%
(on an annualized basis), down slightly from 29.34% at the October 29 auction.
One-year rates were at 26.50% at the November 26 primary auction, down
from 28.63 % at the October 29 auction.
6
From: TREASURY PUBLIC AFFAIRS
20009
1-15-97 4:57pm
p. 12 of 99
Treasury Secretary IS Repon to Congress
November 1996
Rates on Udibonos (3-year maturity) fell from 7.70% on October 29 to
7.19% on November 26. (Those bonds yield a "real" rate. in that their
principal is indexed to Mexican inflation.)
Financial asset prices rose
•
As of November 26. Mexico's stock market had risen 1.8% in peso terms since
the end of October. up 128% over the Feoruary 1995 low. and up 47% from
pre-crisis levels. In dollar terms. the Bolsa index was still down 36% from precrisis levels, but up 104% from its March 1995 low.
•
The Mexican Brady Par Bond yield spread over U.S. Treasuries, adjusted to
remove the effect of partial collateralization. fell from 5.62 % on October 31 to
5.04% on November 26. This is about 14 percentage points below the 19.37%
spread reached in March 1995.
•
Mexico's 30-year uncollaterized dollar global bond. which was priced to yield a
spread of 552 basis points (bps) over U.S. Treasuries on April 30. was trading
in the secondary market on November 26 at 457 bps over comparable U.S.
Treasuries, compared with a spread of 483 bps on October 31.
'
Mexico continues to attract international capital
The Mexican government and its agencies have raised almost $16 billion in the
international capital markets in 1996 to date.
•
On November 7, Mexico launched a 500 billion lire (about $325 million) issue
of five-year floating-rate notes (FRN) priced at 210 bps over three-month
LIBOR. This was the frrst FRN issue denominated in lira from an emerging
market issuer.
•
On November IS, Banobras. the state-owned public works bank, sold $200
million in seven-year Yankee bonds. The bonds have a 9.625% coupon and
were priced to yield 358 basis points over U.S. Treasuries.
7
From: TREASURY PU8LIC AFFAIRS
20009
1-15-97 4:58pm
p. 13 of 99
Treasury Secretary's Repon to Congress
November 1996
•
To date, the United States has received $1.36 billion in interest payments from
Mexico, including $68 million in interest on medium-term swaps paid to the
ESF on September 30.
•
The period during which disbursements could be made under the February 21,
1995 agreements ended on August 21, 1996. The last disbursement under the
program was made on July 5, 1995.
v.
Status of the Oil Facility
The payment mechanism, established under the Oil Proceeds Facility Agreement,
continues to function smoothly. This has been confIrmed by independent reviews (in
August 1995, February 1996, and August 1996).
•
In each review, Petroleos Mexicanos' (PEMEX) independent public auditors,
Coopers & Lybrand, analyzed the information utilized for the previous two
quarterly export reports prepared by PEMEX and provided to the U.S. Treasury
pursuant to the Oil Proceeds Facility Agreement.
•
According to the reviews, the quarterly reports "fairly present" information
related to both PEMEX' s oil exports and the collection of proceeds from such
exports. The next semi-annual review is expected in February 1997.
The Framework Agreement and the Oil Proceeds Facility Agreement were modified in
August to permit the issuance of Mexico's $6 billion floating rate notes, the proceeds
of which were used to prepay most of the outstanding medium-term ESF swaps.
•
These notes are backed by Mexican oil export revenues released from the oil
facility, in a structure substantially similar to that already backing U. S. swaps.
•
Full backing for the $3.5 billion in U.S. swaps that remain outstanding has been
preserved.
Payments through the Federal Reserve Bank of New York account
As of November 20, $14.3 billion had flowed through Mexico's special funds account
at the Federal Reserve Bank of New York, which backs the Treasury swaps. To date,
there have been no set-offs against these proceeds from Mexico's crude oil,
petrochemical. and refmed product exports.
9
Amortization Schedule of ESF and Federal Reserve Swaps with Mexico
a>
a>
...
4-
o
-'
Cl.
E
Cl.
eT>
U"1
~
r"eT>
I
U"1
-'
I
-'
V'l
IX
>-<
<r
u...
u...
<r
u
>-<
-'
aJ
::::l
a..
>-
IX
::::l
V'l
<r
LLJ
IX
IE
o
'-
u...
Total Disbursed
Quarter
(U.S. MiliionSl
13500
_~Endlng
6,000
Mar-31-95
Jun-30-95
5,000
-2,500
Sep-30-95
000031-95
Mar-31-96
f---Jun-30-96
Sep-30-96
r-Dec-31-96
-----Mar-31-97
-----Jun-30-97
----Sep-30-97
--Dec-31-97
Mar-31-98
f---Jun-30-98
j-------Sep-30-98
1--------Dec-31-98
1-------Mar-31-99
------------ f-----Jun-30-99
----Sep-30-99
Oec-31-99
----- - - Mar-31-2000
- - - - - - - -----------Jun-30-2oo0
--------
=c
--
c::;)
c::;)
c::;)
'"
Total Due fUSS million)
Medium-tenn swaps provided on:
01/11195
01/13/95
0210219503114195
04119195
05119195
07105195
2000
3000
2,000
500.
3.000
2.500
5001
Current Interest Rate:
n/a
7.50%1
10.16% 1
9.20%
nlal
nJa
10.~6%1
5OOjMar14 500 (Mar 14
-- f-------- - - - - - f -
I
1
I
1
L
QuattMy
~~~
I
- J------------ 1 - - - - - - - -
700 (Oct 11
1,300 (Jan 29)
- - - f--
0
0
0
- - - - .0
0
0
0
0
-r-0 3000 (AuJl5) 2000 lAug5) 2000 (Aug 5)
0
- - - - - 0 - - - - - - -0- 1------- - - - 0-0
0
0
0
----- ---------- -0
0
0
0
f-------- ---- ---------- - - - - - - -------f---410 ----------- 0 ---41
- - . _ - - - - - r----------------0 - - - - - - - - 0
0
0
41
41
- - - - - - - - f - - - - --------- - - - r---0
0
0
41
41
--_.
- - - - - - - - - - - - - - - - - - - - - - - - ---f--375··
0
0
41
416
------ - - - - f - - - - - - - - ----- ------- --- - - - - - 375
0
416
- - - - - - - : - - - - - - - - --.----0
- -- - - - -41
375
0
0
41
416
--r----- - - - - - - - - - - - - - - ----- -------375 - - 0
0
41
416
- - - - - - - - - - - ------------------ - - - - 375
0
0
41
416
------ - - ----------- ------375 - - - - - - - - - 0 ---416
------- -------- - 0 - - - - - -41
750
0
0 - -41
791
------ 1 - - - - - - - - - - - - - - - - -0
0
0
41
41
-"--- I-- ------ - -- - - r - - - - --------0
0
0
49
49
--------------- - - - - --------- -----Sep-30-20oo
0
0
0
0
0
--- ------------- --I-Dec-31-2000
0
0
0
0
0
Total Remaining
0
0
0
3000
0
0
500
3.5001
• Short-teon swap totals for each period represent equivalent amounts for ESF and Federal Reserve.
-All medium-term swaps payments are due on last date in each calendar quarter. Amounts due flOm swaps of 7195 reduced pro rata through partial payment 815196.
***$2 billion in short teon swaps disbursed on February 2, 1995 were rolled over for an additional 90 day period on
May 3, 1995, and August 1, 1995, for a new maturity date of October 30, 1995. On October 11, Mexico repaid $700 million of
these obligations. The outstanding $1.3 billion was rolled over for an additional 90 day period on October 30, for a
new maturity date of January 29, 1996. when they were repaid.
- This column represents the sum of quartdrly payments in a given year; it does not represent an additional payment.
--
-
--
~-
--
---
-------
--------
---.~
-----
-----
----
----
82
--
-
--
---------
--
---
1,289
-
-
----
~--
2, )39
1
-
---------
------
eT>
t for outstanding balance fUSS million)
fs to date (bold); Scheduled R
Short-tenn swaps· provided on:
~
-~
-
---
~~-------
--
90
3 ~
NEWS
~8~9~. . . . . . . . . . . .. .
................
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
December 2, 1996
Contact:
Jon Murchinson
(202) 622-2960
RUBIN ANNOUNCES FIRST NADBANK FINANCINGS IN UNITED STATES
Treasury Secretary Robert E. Rubin announced Monday that the North American
Development Bank (NADBank) will begin its lending and guarantee operations in the United
States by approving financing for $28.9 million for environmental infrastructure projects.
The NADBank board of directors approved financing for a $24.8 million water
treatment facility for the city of Brawley, California, and for a $4.1 million improvement in
the water supply and wastewater system for the community of Mercedes, Texas, subject in
both cases to confirmation of the participation of other parties to the financing packages. In
addition, the board approved a $2 million management development program for U.S. and
Mexican border communities.
"The Brawley and Mercedes projects demonstrate the ways in which the NADBank can
provide financing for communities that lack access to capital and playa role in solving
environmental problems through innovative market finance," Secretary Rubin said. "The
United States and Mexico share a clearly defined interest in helping to promote and finance
these types of projects which benefit both sides of the border. "
The water treatment facility in Brawley will replace an existing facility that has been
cited for non-conformance by the California State Department of Health Services. Brawley
had difficulty accessing capital markets as a non-rated community. The NADBank designed a
financing package that leverages $2-5 million in loans into $24.8 million in financing by
helping the city gain access to private sector institutional investors.
The Mercedes project highlights the NADBank's capacity to mobilize local, federal and
international organizations to assist small horder communities. The bank's interim financing
of $1.875 million will be combmed with grants from the U.S. Economic Development
Administration and the Rio Grande Valley Empowerment Zone in a sustainable financing
package for environmental cleanup In Mercedes.
-MORERR-1394
Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
-2-
The Border Environment Cooperation Commission (BECC), which assists border states
and communities in designing and coordinating environmental infrastructure projects in the
border region, has certified both of these projects. The NADBank works closely with the
BECC as the lead bank in arranging financing for BECC-certified projects.
The $2 million NADBank management development program is designed to help
communities on both sides of the border achieve effective and efficient operation of their
water, sewage and solid waste management services. Many project sponsors seeking financial
assistance from the bank need technical assistance in order to develop and implement projects
that will be environmentally and financially sound. The program will focus on improving the
institutional and financial capabilities of the project sponsors.
On September 20, the NADBank board announced its first Mexican project financings
with the approval of an $830,000 water supply and wastewater treatment facility in Naco,
Sonora, and a $1.1 million wastewater treatment plant for the Fraccionadora Industrial del
Norte, S.A. (FINSA) industrial park in Matamoros, Tamaulipas.
The NADBank, which was created under the auspices of NAFTA, is an international
financial institution capitalized and governed by the United States and Mexico to finance
environmental infrastructure projects along the U. S. - Mexico border, as well as community
adjustment and investment throughout both nations. Once the bank is fully capitalized, U.S.
appropriations of $225 million will be leveraged into $2-3 billion in financing for border
environmental projects and community adjustment that will provide significant benefits for
U.S. citizens and businesses. The states of Arizona, California, New Mexico and Texas in
particular will benefit from NADBank environmental lending. In addition to its environmental
operations, the NADBank's U.S. community adjustment window will operate nationwide to
offer financing directly through existing federal credit programs to assist communities and
businesses adjust to the new trade environment created by NAFTA.
-30-
NADBank Contact: Annie Alvarado, (21 0) 270-1427
DEPARTMENT
'IREASURY
OF
THE
TREASURY
NEWS
OFFICE OF PUBliC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlDNGTON, D.C. - 20220 - (202) 622-2960
STATEMENT OF VALERIE LAU
INSPECTOR GENERAL
DEPARTMENT OF THE TREASURY
COMMITTEE ON APPROPRIATIONS
SUBCOMMITTEE ON TREASURY, POSTAL SERVICE AND GENERAL GOVERNMENT
December 2, 1996
Chairman Shelby, Members of the Subcommittee. Thank you for the
opportunity to clarify the facts relating to the initiation of
our investigation in response to two Congressional requests.
I
would like to begin by emphasizing that it is my office's general
policy not to discuss open investigations.
In this instance, it
seems that it is general knowledge that we do have an open
investigation.
Indeed, our investigation has been the subject of
much speculation and misinterpretation. This is troubling to my
office particularly since our investigation at this point has
been limited to very preliminary activity.
I have three key points.
First, the purpose of our investigation, to the extent allowed by
the Office of Independent Counsel, is to answer the questions
posed by Senator Stevehs as Chairman of the Senate Governmental
Affairs Committee, and Congresswoman Collins as Ranking Minority
Member of the House Committee on Government Reform and Oversight.
In June, Chairman Stevens requested an investigation of ten
questions generally pertaining to policies and practices
regarding background investigation files and the production of
the list used to request those files.
In September,
Congresswoman Collins' letter to Secretary Rubin requested an
investigation of the preparation of the testimony of Secret
Service officials before the House Committee on Government Reform
and Oversight.
That testimony involved the process by which the
White House access list is maintained and updated.
RR-1395
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
- 2 -
Second, we did not open this investigation until we were assured
by the Office of Independent Counsel that doing so would not
impede its investigation. My office notified the Office of
Independent Counsel immediately after receiving each
congressional request.
Initially, the Office of Independent
Counsel indicated a "strong preference that [we) not initiate any
inv~stigation or proceedings into the matter."
After the second
request, the Office of Independent Counsel informed us that we
could proceed but under strict limitations. At that point, we
opened an investigation.
Because both requests addressed issues
related to the preparation of lists relied upon to request
background investigation files, the two requests were opened as
one investigation.
Last, under the Inspector General Act, it is my office's
responsibility to conduct its work in an independent and
objective manner. My staff and I take this responsibility very
seriously.
-30-
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt. Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
December 2, 1996
RESULTS OF TREASURY'S AUCTION OF l4-DAY BILLS
Tenders for $9,060 million of 14-day bills to be issued
December 3, 1996 and to mature December 17, 1996 were
accepted today (CDSIP: 9127946X7).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.16%'
5.l9%'
5.l8%-
Investment
Rate
5.25%'
5.28%'
5.25%-
Price
99.799
99.798
99.799
Tenders at the high discount rate were allotted 53%'.
The investment rate lS the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
RR-1396
Received
$44,395,000
Acc e 12 ted
$9,059,750
$44,395,000
$9,059,750
°
$44,395,000
°
$9,059,750
°
0
0
$44,395,000
0
$9,059,750
UBLIC DEBT NEWS
Department of the Treasury •
Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-33S0
FOR IMMEDIATE RELEASE
December 2, 1996
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $14,065 million of 13-week bills to be issued
December 5, 1996 and to mature March 6, 1997 were
accepted today (CUSIP: 9127942MS).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
4.97%'
4.98%"
4.98%"
Investment
Rate
S.10%'
S.ll%'
5.11%"
Price
98.744
98.741
98.741
Tenders at the high discount rate were allotted 53%".
The investment rate ~s the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
RR-1397
Received
$73,861,141
Acce 12 ted
$14,065,461
$68,271,119
1,411,267
$69,682,386
$8,475,439
1,411,267
$9,886,706
3,452,955
3,452,955
:Z22,~QQ
:Z22,~OQ
$73,861,141
$14,065,461
UBLIC DEBT NEWS
Department of the Treasury •
Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
December 2, 1996
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $14,124 million of 26-week bills to be issued
December 5, 1996 and to mature June 5, 1997 were
accepted today (CUSIP: 9127944L5).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.02%"
5.04%"
5.04%-
Investment
Rate
5.22%"
5.24%"
5.24%-
Price
97.462
97.452
97.452
Tenders at the high discount rate were allotted 51%".
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
5.03
RR-1398
97.457
Received
$44,103,978
Accepted
$14,123,857
$36,593,562
1.149,316
$37,742,878
$6,613,441
1.149,316
$7,762,757
3,750,000
3,750,000
2,611.100
$44,103,978
2,611.100
$14,123,857
NEWS
'IREASURY
~~----_ _ _ _~8~9~_ _ _ _ _ _ _ _ _ __
OffiCE OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. _ 20220 _ (202) 622.2960
EMBARGOED UNTIL 2: 30 P. M.
CONTACT:
December 3, 1996
Of f ice of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $26,000 million, to be issued December 12,
1996. This offering will result in a paydown for the Treasury of
about $615 million, as the maturing 13-week and 26-week bills are
outstanding in the amount of $26,679 million. In addition to the
maturing 13-week and 26-week bills, there are $18,792 million of
maturing 52-week bills. The disposition of this latter amount
was announced last week.
Federal Reserve Banks hold $13,015 million of bills for
their own 'accounts in the three maturing issues. These may be
refunded at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $4,795 million of the three
maturing issues as agents for foreign and international monetary
authorities. These may be refunded within the offering amount
at the weighted average 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. For purposes of determining such additional
amounts, foreign and international monetary authorities are
considered to hold the entire $4,795 million of the original 13~eek and 26-week issues.
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 (31 CFR Part 356) for the sale and issue by the
Treasury to the public of marketable Treasury bills, notes, and
bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
RR-1399
BIQBLJ:GBTS OF T'RDBURY Ol'VDDIGS OF WBULY BILLS
TO as ISSUED DBCBMBBR 12, 1996
December
~
CL
~
(J)
......
r\I
~
QI: I: tU;:1~ Amoy,g,t
.
. .
Term and type of security
CUSIP number
Auction date
. .
Issue date
. ·
Maturity date
·
Original issue date
CUrrently outstanding
Minimum bid amount
Multiples
·
Submission of Bids:
Noncompetitive bids
Competitive bids
......
Maximum Recognized Bid
at a Single Yield
Maximum Award . . . . .
....~
Receipt of Tenders:
Noncompetitive tenders
r\I
~
....
$13,000 million
$13,000 milliol.
~~IQ~1~t12D gf Q"~~1Qgl
The following rule. Apply to all
~
.
Competitive tenders
N
Payment Terms . . .
91-day bill
912794 4B 7
December 9, 1996
December 12, 1996
March 13, 1997
September 12, 1996
$11,192 million
$10,000
$ 1,000
182-day bill
912794 4M 3
December 9, 1996
December 12, 1996
June 12, 1997
December 12, 1996
- - -
$10,000
$ 1,000
lecvritiea megtiog,d above.
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10%.
(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 $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.
35' of public offering
35' of public offering
Prior to 12:00 noon Eastern Standard time
on auction day
Prior to 1:00 p.m. Bastern Standard time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
!;::
CL
I
I!
~
c
~
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • vVashington, DC 20239
FOR RELEASE AT 3:00 PM
December 5, 1996
Contact: Peter Hollenbach
(202) 219-3302
PUBLIC DEBT ANNOUNCES ACTIVITY FOR
SECVRITIES IN THE STRIPS PROGR.\JvI FOR ~OVE\IBER 1996
Treasur:-/s Bureau of the Public Debt announced activity figures for the month of :';-ovember 1996. of
securities within the Separate Trading of Registered Interest and Principal of Securities program
(STRIPS).
Dollar Amounts in Thousands
Principal Outstanding
(Eligible Securities)
$928,139,979
Held in Unstripped Fonn
$705,004,894
Held in Stripped Form
$223,135.085
513,647,413
Reconstituted in November
The accompanying table gives a breakdown of STRIPS activity by individual loan description. The
balances in this table are subject to audit and subsequent revision. These monthly figures are included
in Table VI of the Month!.". Statement of the Public Debt. entitled "Holdings of Treasury Securities in
Stripped Form."
Information about "Holdings of Treasury Securities in Stripped Form" is no\\ available on the
DeDanment
of Commerce's Economic Bulletin Board (EBB). The EBB. which can be accessed usin!:!
,
pe:-sonal computers. is an inexpensive service provided by the Department of Commerce. For more
information concerning this service call 202-482-1986.
-
000
PA.-~-+ 1
RR-1400
TABLE VI - HOLDINGS OF TREASURY SECURI71;::> IN S7RIPP:D FORM. NOVEMBER 30. 1996
(In thousands)
PnnC::lal AlT:ount Outstanding
II
------11
Loan Descnpllon
8-112% Note A·1997 ..
8-5/8% Note 8-1997 ..
8-7/8% Note C·1997 ..
8·1/8% Note A·1998 .....
9% Note B·1998 ...
9-114% Note C·1998 ..
8-7/8% Note 0-1998 ..
8-7/8% Note A·1999 .
9-1/8% Note B·1999 .
8% Note C·1999 ..
7·7/8% Note 0·1999 ..
8-1/2% Note A·2000 ..
8-7/8% Note 8-2000
8-3/4% Note C·2000 ......
8·1/2% Note 0-2000 ......
7·3/4% Note A·2001.. ....
8% Note 8-2001.. ........
7·7/8% Note C·2001.. ..
7·112% Note 0-2001.. ....
7·112% Note A·2002 ......
8-3/8% Note B·2002 ......
8-1/4% Note A·2003 ......
5-3/4% Note B·2003 ......
5-7/8% Note A·2004 ......
7·1/4% Note B·2004 ......
7·1/4% Note C·2004 ......
7·7/8% Note 0-2004 ......
7·1/2% Note A·2005 ....
8-1/2% Note B·2005 ......
8-112% Note C·2005 ......
5-7/8% Note 0·2005 ......
5-5/8% Note A·2006 ......
8-7/8% Note B·2006 ......
7% Note C·2006 ....
8-1/2% Note 0-2006 ......
11·5/8% Bond 2004 ......
12% Bond 2005 ...........
10-3/4% Bond 2005 .....
9-3/8% Bond 2006 ........
11·3/4% Bond 2009-14 ...
11·1/4% Bond 2015 ....
10-5/8% Bond 2015 ..
9-7/8% Bond 2015
9-114% Bond 2016 ...
7·114% Bond 2016
7·1/2% Bond 2016 ...
6-3/4% Bond 2017.
8-7/8% Bond 2017 ..
9-118% Bond 2018 ..
9% Bond 2018 ...
6-7/8% Bond 2019 ..
8-1/8% Bond 2019 .....
6-1/2% Bond 2020 ..
8-3/4% Bond 2020 ..
8-3/4% Bond 2020
7·7/8% Bond 2021 .
8-118% Bond 2021
6- 118% Bond 2021 .
8% Bond 2021 .
7·114 % Bond 2022
7·5/8% Bond 2022
7 ·118% Bond 2023
8-1/4% Bond 2023
7·1/2% Bond 2024
7·5/8% Bond 2025
8-7"8% Bond 2025
6% Bond 2026
8-314% Bond 2026
8-1/2% Bond 2026
Total
Matunty Date
05/15/97.
08/15/97 ..
11/15/97 ...
02115/98.
05/15/98 ...
08/15/98 ..
11/15/98 ....
02115/99 ...
05/15/99 ..
08/15/99 ..
11115/99 .....
02115/00 ..
05/15/00 ..
08/15/00 ......
11/15/00 ..
02115/01..
05/15/01..
08/15/01.. ..
11/15/01..
05/15/02 .....
08/15/02 ..
02115/03 ..
08/15/03 ..
02115/04 ....
05/15/04 ..
08115/04 ......
11/15/04 ......
02115/05 ..
05/15/05 ..
08/15/05 ..
11115/05 ......
02115/06
05/15/06
07/15/06
10/15/06
11/15/04 ......
05/15/05 .....
08/15/05 .....
02115/06 ......
11/15/14 .....
02115/15
08/15/15
11/15/15
02115/16 .
05/15/16
11/15/16 ...
05/15/17 ...
08/15/17 ..
05/15/18 ...
11/15/18 ....
02115/19 ..
08/15/19 ...
02115/20 ..
05/15/20.
08/15/20
02115/21
05/15/21 .
08/15/21
11115/21
08/15122
11/15122
02115/23
08/15/23
11/15/24
02115/25
08/15/25
02115/26
08/15/26
11/15/26
Foroon Held In
Uns;npped Form
Total
9.921.237
9362.836
9.808.329
9.159.068
9.165.387
11.342.646
9.902.875
9.719.623
10.047.103
10.163.644
10.773.960
10.673.033
10.496.230
11.080.646
11.519.682
11.312.802
12.398.083
12.339.185
24.226.102
11.714.397
23.859.015
23.562.691
28.011.028
12.955.077
14.440.372
13.346.467
14.373.760
13.834.754
14.739.504
15.002.580
15.209.920
15.513.587
16.015.475
22.740.446
22.460.000
8.301.806
4.260.758
9269.713
4.755.916
6 005.584
12667.799
7.149.916
6899.859
7.266.854
18.823.551
18864.448
18 194.169
14016858
8.708639
9032.870
19250.798
20.213832
10228868
10158883
21418606
11 113373
11 958 888
1:163482
3: 7Se 3<;4
': 35: 790
': 6 .. 6:5
18 3~4 361
== SOS ()44
~ •• 69662
11725170
I
I
1: 6:: 007
1: S:)4 916
l:e;3918
,~ 493 , 7-
I
.9:9 '3; 9~9
,
Portion Held ,n
Stnpped Form
II
II
2.402.800
2.680.000
3.369.600
2.149.120
2.520.800
3.072.000
3.467.200
1,724.800
3.145.EiOO
2.856.375
3.436.800
2.704.400
4.803.200
3.892.000
4.107.200
3.290.400
3.669.900
2.856.000
3.203.440
1.668.640
1.116.800
371.872
439.200
172.800
6.400
45.600
7.518.437
6.682.836
6.438.729
7.009.948
6.644.587
8.270.646
6.435.675
7.994.823
6.901.503
7.307.269
7.337.160
7.968.633
5.693.030
7.188.646
7.412.482
8.022.402
8.728.183
9.483.185
21.022.662
10.045.757
22.742.215
23.190.819
27.571.828
12.782.277
14.433.972
13.300.867
14.373.760
13.834.754
14.739.504
15.002.580
15.209.920
15.513.587
16.015.475
22.740.446
22.460.000
4.516.206
1.802.408
6.855.313
4.741.516
1.991.184
10.493.079
4.591.836
4.360.659
6.454.854
18.494.751
18.204.928
11.197.689
7.844.058
2.867.039
2.769.270
5.322.798
18.106.312
6.012.468
3.759.043
6.209.806
9.924.573
5.606.248
4.071.002
6.552.494
8256.790
2.862.826
14.118.361
22.417.556
4.166.222
5.353.970
12.277.527
12.420.516
10.870.618
11.492.377
3.785.600
2.458.350
2.414.400
14.400
4.014.400
2.174.720
2.558.080
2.539.200
812.000
328.800
659.520
6.996.480
6.172.800
5.841.600
6.263.600
13.928.000
2.107.520
4.216.400
6.399.840
15.208.800
1.188.800
6.352.640
8.092.480
26.245.900
2.096.000
7.836.800
4.256.000
491.488
7.303.440
6.371.200
324.480
484.400
23.200
800
705004.894
223.135.085
II
II
I
I
I
I
I
I
I
I
I
I
Reconstituted
This Month
'I
2.400
16.000
62.400
244.480
21.200
34.400
72.000
62.400
59.200
85.725
16.000
57.200
6.400
111.840
o
71.200
87.000
28.800
77.600
33.600
84.800
21.504
7.200
o
o
o
o
o
o
01
o
o
o
o
o
o
o
o
o
o
o
o
o
o
540.800
55.000
305.600
o
65.600
1.530.880
1.584.000
131.200
236.800
11.200
342.960
1.190.400
168.000
604.800
303.000
892.800
658.880
183.200
385.760
650.080
22.400
665.600
123.520
522.000
42.400
9.600
76.800
374.464
417.680
166.400
122.240
o
o
o
II
13.647.413
======================================= ================================================= ====================== =====================
111 Effective May 1. 1987. seCUrities held In stnpped form were eltglble 'or recons:~utlon to ~~e,r uns:npped form
Note On the 4th wor1<day of each month Table VI Will be available alter 3 OC p m eastem t,,-e on ~~e Commerce Department's
EconomiC Bulletin Board (E3B) The telephone number for more Informat,cn aoout ES5 :s (202) 482·1986 The balances
UBLIC DEBT NEWS
Department ot the Treasury •
Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
December 5, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
Tenders for $19,327 million of 52-week bills to be issued
December 12, 1996 and to mature December 11, 1997 were
accepted today (CUSIP: 9127942Xl).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
5.13%"
5.16%
5.16%-
Investment
Rate
5.41%"
5.45%
5.45%-
Price
94.813
94.783
94.783
Tenders at the high discount rate were allotted 86%.
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
Received
$44,292,387
Accepted
$19,326,767
$37,969,590
795,344
$38,764,934
$13,003,970
795,344
$13,799,314
5,527,453
5,527,453
o
o
$44,292,387
$19,326,767
An additional $1,201,000 thousand of bills will be
issued to foreign official institutiolls for new cash.
5.14 - 94.803
5.15
94.793
iJLfAKfMENT
OF
THE
TREASURY
1789
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622·2960
December 6, 1996
Monthly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reserve assets data for the month of
November 1996.
As indicated in this table, U.S. reserve assets amounted to $75,444 million at the end
of November 1996, down from $75,557 million in October 1996.
End
of
Month
Total
Reserve
Assets
Gold
Stock II
Special
Drawing
Rights
2/3./
Foreign
Currencies M
ESF
System
Reserve
Position
in IMF
21
October
75,557 r
11,049
10,226
19,334
19,431
15,517
November
75,444 P
11 ,049p
10,386
19,240
19,253
15,516
II Valued at $42.2222 per fine troy ounce.
2,/ Beginning July 1974, the IMF adopted a technique for valuing the SDR based on a
weighted average of exchange rates for the currencies of selected member countries. The
U.S. SDR holdings and reserve position ,in the IMF also are valued on this basis
beginning July 1974.
3/ Includes allocations of SDRs by the IMF plus transactions in SDRs.
~I
Holdings of Treasury Exchange Stabilization Fund (ESF) and Federal Reserve System.
Beginning November 1978, the·se holdings are valued at current market exchange rates or,
where appropriate, at such other rates as may be agreed upon by the parties to the transactions.
p Preliminary
Fof pr~s, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
RR 1402
~
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
December 9, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $13,035 million of 13-week bills to be issued
December 12, 1996 and to mature March 13, 1997 were
accepted today (CUSIP: 9127944B7).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Discount
Rate
Low
High
Average
Investment
Rate
4.82~
4.95~
4.83%'
4.83%"
4.96%'
4.96%"
Price
98.782
98.779
98.779
Tenders at the high discount rate were allotted 22%'.
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
RR-1403
Received
$54,253,706
Acce12ted
$13,034,551
$49,005,477
1,404,528
$50,410,005
$7,786,322
1,404,528
$9,190,850
3,754,501
3,754,501
89,200
$54,253,706
89,200
$13,034,551
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
December 9, 1996
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $13,101 million of 26-week bills to be issued
December 12, 1996 and to mature June 12, 1997 were
accepted today (CUSIP: 9127944M3).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
4.96%4.98%'
4.97%"
Investment
Rate
5.16%5.18%"
5.17%"
Price
97.492
97.482
97.487
Tenders at the high discount rate were allotted 15%".
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
RR-1404
Received
$48,932,625
AcceEted
$13,100,968
$41,246,635
1,131,164
$42,377,799
$5,414,978
1,131,164
$6,546,142
3,732,826
3,732,826
2,822,000
$48,932,625
2,822,000
$13,100,968
FACT SHEET
TREASURY'S 'OIL FOR FOOD' REGULATIONS 12/10/96
* The Treasury Department's Office of Foreign Assets Control (OFAC) has issued
regulations impacting United States firms planning to participate in the United Nationsadministered sale of Iraqi oil in exchange for humanitarian goods.
* American energy firms that have signed executory contracts for the purchase of Iraqi
crude oil -- as per a previously issued OF AC general license -- can now request specific licenses
that will place them on the US. list for direct dealings with the UN. committee in charge of such
sales.
* Applicants for these specific licenses must submit basic business information, written
certification that they have entered into an executory oil purchase contract with Iraq and fully
understand and will abide by all applicable US. and UN rules, and an acknowledgment that, as
licensees, they will promptly provide OF AC officials on demand information pertaining to their
dealings in Iraqi oil.
* OF AC will expeditiously process applications and provide the resulting list of licensees
to the administering UN. committee.
* The regulations generally license all U.s persons and firms to enter into secondary oil
purchase agreements with any primary purchaser previously authorized by the UN
;\: Specific licenses are also available to US firms that have signed executory contracts to
sell humanitarian goods such as food and medicine, or essential pipeline equipment, to Iraq
through UN. procedures. Copies of contracts with Iraq and other information must be provided
to OFAC, which will review them and, if appropriate, forward them for UN. approval.
;\: OF AC's so-called "oil for food" regulations were filed with the Federal Register and
became effective today. They can be obtained from the Federal Register or from OF AC's fax-ondemand system at (202) 622-0077 They also will be available electronically via the Internet the
day of publication on the Federal Bulletin Board By modem, dial (202) 512-1387 and type "\GO
F AC" or call (202) 512-1530 for disk or hard copies
;\: Media questions can be directed to Darren McKinney at Treasury's office of public
affairs, (202) 622-2960
RR-1405
DEPARTMENT
OF
THE
'IREAS1JRY 1(.)
TREASVI~Y
NEW S
CONTACT!
EMBARGOED UNTIL 2: 30 P. M.
December 10, 1996
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $26,000 million, to be issued December 19,
1996. This offering will result in a paydown for the Treasury of
about $28,925 million, as the maturing bills total $54,919 million
(including the 48-day cash management bill issued on November 1,
1996, in the amount of $17,048 million and the 34-day cash
management bill issued on November 15, 1996, in the amount of
$13,217 million).
Federal Reserve Banks hold $6,964 million of the maturing
bills for their own accounts, which may be refunded within the
offering amount at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $6,289 million as agents for
foreign and international monetary authorities, which may be
refunded within the offering amount at the weighted average
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.
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 (31 CFR Part 356) for the sale and issue by the
Treasury to the public of marketable Treasury bills, notes, and
bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment.
RR-1406
~
HIGHLIGHTS OF TREASURY OFFERINGS OF WEBKLY
TO BE ISSOBD DBCBMBER 19, 1996
m
B~LLS
("\
...I
~
December 10, 1996
Offering Amount .
pescription of Offering:
$13,000 million
$13,000 million
Term and type of security
CUSIP number
Auction date
Issue date
Maturity date
Original issue date
CUrrently outstanding
Minimum bid amount
Multiples.
91-day bill
912794 4C 5
December 16, 1996
December 19, 1996
March 20 1 1997
September 19, 1996
$11,105 million
$10,000
$ 1,000
182-day bill
912794 4N 1
December 16, 1996
December 19, 1996
June 19, 1997
December 19, 1996
I
ILl
~
-t
C
IT1
...
..
VI
&
m
$10,000
$ 1,000
-t
;tJ
IT1
The followipg rule. apply to all securities mentioped abovo:
Submission of Bide:
Noncompetitive bids
Competitive bids
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10\.
(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 $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.
Maximym Recognized Bid
at a Single Yield
Maximum Award .
Competitive tenders
Payment Terms .
.
\
b1
11
t::j
ILl
ID
ID
In
fJ)
~
\
[
D
35\ of public offering
35\ of public offering
Receipt of Tenders:
Noncompetitive tenders
D
If)
Prior to 12:00 noon Eastern Standard time
on auction day
Prior to 1:00 p.m. Eastern Standard time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
fJ)
I
1)
m
tv
D EPA R T 1\1 E N T
0 F
THE
T REA SUR \'
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVA."1lA AVENUE. N.W .• WASHINGTON. D.C.. 20220. (202) 622·2960
EMBARGOED UNTIL 2:30 P.M.
December 11, 1996
CONTACT:
Office of Financing
202/219-3350
TREASURY TO AUCfrON 2 - YEAR AND 5 - YEAR NOTES
TOTALING $30,750 MILLION
The Treasury will auction $18,250 million of 2-year notes
and $12,500 million of 5-year notes to refund $27,768 million of
publicly-held securities maturing December 31, 1996, and to raise
about S2,975 million new cash.
In addition to the public holdings, Federal Reserve Banke
hold $1,475 million of the maturing securities for their own
accounts, which may be refunded by issuing additional amounts
of the new securities.
The maturing securities held by the public include $1,879
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.
Both the 2-year and 5-year note auctions will be conducted
in the single-price auction format.
All competitive and noncompetitive awards will be at the highest yield of accepted
competitive tenders.
Tenders will be received at Federal Reserve Banks and
Branches and at the Bureau of ·..:.he Public Debt, Washington, D. C.
This offering of Treasury securities is governed by the terms
and conditions set forth in the Uniform Offering Circular (31 CPR
Part 356) for the sale and issue by the Treasury to the public of
marketable Treasury bills, not~s, and bonds.
Details about each of the new securities are given in the
attached offering highlights
000
At.t.achment
RR-1407
HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC OF
2-YEAR AND 5-YEAR NOTES TO BE ISSUED DECEMBER 31, 1996
N
December 11, 1996
~
CL
Iif)
W
~
~
~
I-
Pl
W
I=l
.J
Pl
:::l
r1.
Qtfering Amount .
Description of Offering:
Term and type of security
Series
CUSIP number
Auction date
Issue date
Dated date
Maturity date
Interest rate
yield .
Interest payment dates
Minimum bid amount
Multiples .
Accrued interest
payable by investor
Premium or discount .
$18,250 million
$12,500 nillion
2-year notes
AN-1998
912827 2D 3
December 18, 1996
December 31, 1996
December 31, 1996
December 31, 1998
Determined based on the
highest accepted bid
Determined at auction
June 30 and December 31
$5,000
$1,000
5-year notes
R-2001
None
Determined at auction
91~tl27
2E 1
December 19, 1996
December 31, 1996
December 31, 1996
December 31, 2001
Determined based on the
highest accepted bid
Determined at auction
June 30 and December 31
$1,000
$1,000
None
Determined at auction
\
if)
~
~
~
lN
~
"
f'4
f'4
~
IU
J
IJ'-
"...,...
Tbo following rules apply to all securities mentioned &hOVtl
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, 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
35\ of public offering
at a Single Yield
. 35t of public offering
Maximum Awarq .
Receipt of Tenders:
Prior to 12:00 noon Eastern Standard time on auction day
Noncompetitive tenders
Competitive tenders
Payment Terms
.
Prior to 1:00 p.m. Eastern Standard time on auction day
Full payment with tender or by charge to a funds account at a
Federal
Reserve Bank on 1seue date
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
EMBARGOED UNTIL 9:00 A.M. (EST)
Strengthening Our International Tax System
Lawrence H. Summers
Deputy Secretary of the Treasury
Treasury Conference on Formula Apportionment
Washington, D.C.
December 12, 1996
Good morning. On behalf of the Treasury Department, I would like to welcome all of
you to this conference on formula apportionment. I would particularly like to thank Senator
Dorgan for his leadership on this subject. Senator Dorgan has played the key role in bringing
these issues to the forefront of our national debate.
Before beginning, I would like to stress at the outset, the full, unqualified, support of
the United States government for the international consensus that has developed on how to tax
the cross-border transactions of multinational corporations. The fact that the Treasury
Department is holding this conference does not indicate in any way that our support for the
arm's length method is wavering. Nevertheless, it is also clear that we can all benefit from the
frank exchange of opinions regarding alternative taxation approaches.
Today, I will discuss two broad subjects. First, I would like to summarize the five
broad goals we must pursue when taxing multinational enterprises. In tum, I will discuss key
issues that arise when considering adopting the formula apportionment system for federal
purposes and give my assessment of the outlook for the future.
Goals of the international tax system
The central objective of any international tax system is to create a tax environment that,
while promoting competitiveness, does not permit companies to divert income to tax havens.
And achieving that objective requires a delicate balance among five principal goals. The goals
are:
•
Neutrality of location
•
Maintenance of competitiveness
•
Administrability
•
Protection of the revenue base; and
•
Compatibility with international norms.
RR-1408
Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
2
Any proposed change should be viewed in the context of these goals and must bear the
burden of proof that it will improve, not merely match the performance of the current system.
Let me discuss each of these goals in turn.
Neutrality in location. Our first goal must be to insure that our tax system does not direct
investment to a particular location or interfere with the choice of American companies to
invest where they believe they can best contribute to productivity. We have pursued this
objective from the time we began taxing companies in the early 1900's. We accordingly tax
our companies on their worldwide income but avoid creating incentives for them to shift
operations overseas. Here in the US, we offer a nondiscriminatory open market where
foreign-based firms can freely contribute to the growth of our economy.
Maintenance of Competitiveness. We must also allow our companies to compete on equal
footing with their foreign counterparts when they do business abroad. We do not tax the real
operating income of US controlled foreign companies. In addition, we provide a broad-based
credit for foreign income taxes to avoid double taxation. Promoting our companies'
competitiveness abroad is important not only because of the substantial amount of investment
generated, but also because this investment spurs demand for US goods and services, which
stimulates additional demand for US employment.
Administrability. We must also be able to administer our laws and make sure that we collect
the proper amount of revenue from our companies that do business abroad and from foreign
companies doing business in the United States. To do this, the system must not become too
complex and it must encourage companies to comply voluntarily with the rules --- and to
penalize them when they fail to comply. Our system must also encourage international
cooperation on tax administration.
Protection of the Revenue Base. In the past couple of years, we have examined several tax
reform proposals that purport not only to simplify our tax system, but also to cure all of the
ailments in our present system. My guess is that if any of these proposals were as good as
their proponents say, they would have been adopted long ago. We should also bear in mind
that methods that appear simple on paper can be devilishly difficult in practice.
Compatibility with International Norms. Finally, a primary goal of our international tax
system that is sometimes lost in the debate, is that it must remain compatible with international
norms.
It is easy to envision systems that satisfy one or more of these goals but not all of them.
Taken together, the five goals provide a strong framework with which to assess tax proposals.
The Ann's Length Standard
3
Let me now turn to some specific methods of international taxation. I would like to
reflect first on the current arm's length standard. Though it has been in service for many
years, the application of the current arm's length standard continues to evolve.
The longstanding view in the United States and around the world is that related
taxpayers should be held to the pricing standard established by unrelated taxpayers. By
adhering to what is called the "arm's length standard", related taxpayers are prevented from
ignoring market considerations when setting their "transfer prices" (i.e., the price for their
internal transactions) and gaining an unfair tax advantage over their unrelated competitors.
Finding the correct transfer prices is important because these prices determine how a
multinational company's income is divided between the United States and other countries. If
U.S. companies and the U.S. subsidiaries of foreign companies can manipulate these prices,
then taxable income reported to the United States may be artificially lowered, the U.S.
revenue base will be eroded, and the overall corporate tax liability will be inappropriately
reduced. Conversely, if the transfer pricing rules require too much income to be reported to
the United States, the resulting double taxation of international income flows would harm
companies doing business in the United States.
The Clinton administration has made tremendous progress in improving the efficiency
and application of the arm's length standard, and we continue to promote new approaches:
•
•
•
•
•
We updated our transfer pricing regulations to incorporate new pricing methods that
reflect the increasingly complex nature of multinational companies' operations and the
growth in the cross-border transfer of intangible goods.
We finalized regulations implementing a legislative change that improves our selfassessment tax system. Under these regulations, taxpayers are required, subject to
penalties, to make a reasonable effort to reflect arm's length prices in their transactions
with related parties.
The US joined with tax administrators of the OECD member countries in issuing a
reporting that provided a ringing endorsement of the arm's length principle. We have
gained international acceptance of our transfer pricing methods. More and more
countries, particularly in Asia and Latin America, are adopting and beefing up
enforcement of their transfer pricing rules.
In addition, we have taken steps to counter transfer pricing abuses.
In the OBRA 1993 legislatio~ and subsequent implementing regulations, we stiffened
penalties on taxpayers that neglect their responsibility to comply with US law.
The Administration has also strengthened the "earnings stripping" rules to more
effectively limit the ability of foreign companies to siphon profits out of the United
States in the form of untaxed interest payments.
4
These steps move us even further towards our goal of insuring taxation of all income
by the appropriate jurisdiction while avoiding double taxation.
The Changing Economic Environment
While this system has, on balance, served us well and we are continuing to improve
and refine it, it is also important that we be open to alternative approaches. The tax system is
a living organism that must continually adapt to change. If incremental improvements are
desirable, it is legitimate to ask whether more radical change is needed. Forces that might lead
us to consider a dramatic change include large changes in how and where firms do business.
Accordingly, I would like to take a moment to discuss the global economy.
The dismantling of economic barriers to cross-border trade is stimulating additional
cross-border investment flows, with US investment abroad and foreign investment in the
United States each rising nearly 10-percen.t annually. US direct investment into Europe has
increased more than $150 billion since the Europeans embarked on their project to create a
barrier-free Single European Market and now exceeds $360 billion in manufacturing and
services industries. At the same time, US direct investment in the dynamic Asian economies
rose 16 percent in 1995 and now exceeds $100 billion.
Our present system is flexible enough to permit us to accommodate advances in
electronic commerce as discussed in our recent report on that subject. Nevertheless, the
growth in new technologies coupled with the greater integration of the world economy
suggests that it may be time to examine whether more radical changes to our tax system are in
order.
An Alternative Approach to International Taxation
As I said in a paper ten years ago discussing Tax Policy in the 21st Century, which now
is just around the comer, increasing international economic integration creates an increased
need for international harmonization of tax policies. In that regard, the states' experience may
be helpful in evaluating potential changes to the federal approach. As you will hear discussed
later today, some states used the arm's length approach until it became unworkable for dealing
with the increasing number of large, integrated businesses that had no clear-cut way of
allocating profits across jurisdictions. The states turned to apportionment, which, given the
integrated nature of their economies and of multistate businesses, proved a workable
alternative to the separate accounting method. Even though the system worked well in the
states, however. I said then that it would be premature to conclude that the system used by
America's 50 states is the right one for the world economy. Ten years later, I still support that
conclusion.
1. nevertheless, believe that we need to be thinking of ways to address the technical
problems created by world economic integration. In my paper, I predicted that by the twentyfirst century, nations would have taken major new cooperative steps to tax multinational
5
corporations. This step has already occurred, as shown by our trading partners' unanimous
endorsement of our new transfer pricing methodologies. I am confident that during the 21st
century we will continue to examine and improve our tax system.
Formula apportionment does have an advantage, or a disadvantage, depending on your
view, over other radical reforms proposed to our tax system. Unlike other radical proposals
such as the flat tax, the formula apportionment method is an approach that has been tried and
tested extensively in the U.S. states. Thus, our states can teach us about the possible
advantages and potential dangers of using this system at the federal level. Not only that, we
don't have to go to the state capitals to pose our questions. Many of our federal legislators are
experienced state tax officials, including Senator Dorgan, who is a former North Dakota tax
commissioner, who knows the strengths as well as the weaknesses the states face with the
formula apportionment system.
It is equally clear, however, that moving to formula apportionment would not be easy.
Because it apportions total income using a simple formula, its proponents claim that companies
need find just a handful of numbers to determine their tax liability. This claim will be true
only if countries can agree fully on the definition of total income and the formula. If they
can't reach this agreement, then the amount of information required would be multiplied by
the number of different definitions used by different countries. In addition, severe double
taxation or undertaxation would arise when these definitions failed to conform to one another.
Thus, in the absence of a greater consensus than the world has been able to achieve in any
arena to date, the formula apportionment approach is not a realistic alternative to the arm's
length standard.
Why not make a unilateral move?
Given the difficulty in reaching consensus on all of the elements of the system, should
the United States take the lead in proposing a move to formula apportionment, assuming that
other countries will inevitably follow? The answer is no.
•
First, since the formula apportionment system is not compatible with current practices,
a unilateral move would severely disrupt world business. Companies would find
themselves overtaxed as countries moved to appropriate more income.
•
Second, proposing a radically different approach after having worked so hard to
strengthen support for the current approach would pose a number of challenges.
However, if there is one overridingly compelling reason to support the current system,
it is that the existing arm s length standard represents the best way, in today s economic
environment to achieve fair taxation of international transactions.
I
I
The United States would, in all likelihood, be isolated if we unilaterally adopted
formula apportionment. The resulting overlap of incompatible approaches would destroy our
network of tax treaties and severely harm the ability of our companies to compete on the world
6
stage. Given the importance of international cooperation in implementing formula
apportionment, the U.S. cannot and should not move forward alone.
Conclusion
The success of the apportionment system in the states depends significantly on the
states' ability to use a common accounting system, common currency, and to apply a common
definition of taxable income as well as an ability to work under the umbrella of the federal
system. There are no real barriers to the cross-border movement of goods and services at the
state level. One day, the global economy may reach such a stage of economic integration;
however, that day has not yet arrived.
As I have said on other occasions, we must build a tax system that is administered
fairly and that promotes equity, growth, and simplicity. It would be a mistake to tum back on
the progress we have made so far. Instead, we must continue to build on that progress by
strengthening our commitment to ensure that all companies, whether foreign or American, pay
their fair share of taxes, no more, no less.
I look forward to a frank exchange of opinions and analysis of some of the important
technical and administrative issues surrounding the vital subject of our international system of
taxation later today.
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I-UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
December 12. 1996
Contact: Peter Hollenbach
(202) 219-3302
RUBIN NAMES 1997 U.S. SAVINGS BONDS VOLUNTEER COMMITTEE
Treasury Secretary Roben E. Rubin today named Chevron Chairman and CEO Kenneth T. Derr
National Chair of the 1997 U. S. Savings Bonds Volunteer Committe~.
"Volunteers are the mainstay of the savings bonds program," Secretary Rubin said. "Mr. Derr
and his committee of top business and government leaders will do much to make our 1997
savings bonds campaign a success. Their work is important because it educates employees about
the need to save for the future."
Series EE savings bonds offer all Americans a safe, convenient way to save. Available for as
little as $25, bonds pay market-based interest, enjoy federal tax deferral on earnings and are free
from state and local income taxes. Some 55 million Americans own savings bonds worth $187
billion. Seven million individuals buy bonds through the payroll savings plan where they work.
Mr. Derr assumed his present position in 1989 after serving one of the company's two vicechairmen, responsible for Chevron's U.S. petroleum business, chemicals, coal, land
development, research and several major corporate staff groups. such as Human Resources,
Public Affairs and Environmental Affairs.
A native of Wilkes-Barre, Pa., Derr joined Chevron after graduating from Cornell University
with degrees in mechanical engineering and business administration. He is chairman and a
director of the American Petroleum Institute. He is a member of President Clinton's Council on
Sustainable Development and served as a member of President Bush's Commission on
Envirorunental Quality.
Mr. Derr succeeds 1996 National Chair James R. Leva, Chainnan, President. and Chief
Executive Officer of General Public Utilities Corporation (GPU), New Jersey.
A list of members of the 1997 U. S. Savings Bonds Volunteer Committee is attached.
000
PA-242
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1997 U.S. SAVINGS BO}IDS VOLUNTEER COMMITTEE
NATIONAL CHAIR
CHEMICALS
Kenneth T. Derr
Chairman and CEO
Chevron Corporation
San Francisco, CA
William H. Joyce
Chairman, President and CEO
Union Carbide Corporation
Danbury, CT
ADVERTISING/PUBLIC RELATIONS
CITY GOVERNMENT
*Burt Manning
Chairman and CEO
J. Walter Thompson Co.
Worldwide
New York, NY
The Honorable Willie Brown
Mayor
City of San Francisco
San Francisco, CA
COUNTY GOVERNMENT
AEROSPACE
Michael M. Sears
President Douglas Aircraft
Corporation/
McDonnell Douglas
Corporation
Long Beach, CA
AUTOMOTIVE
Alexander J. Trotman
President and CEO
Ford Motor Company
Dearborn, MI
BANKING
*Lawrence K. Fish
Chairman, President and CEO
Citizens Financial Group
Providence, RI
*
serving a second year
The Honorable Chris Hart
Hillsborough County
Board of County Commissions
Tampa, FL
ELECTRICAL EQUIPMENT
*Robert J. O'Toole
Chairman, President and CEO
A.O. Smith Corporation
Milwaukee, WI
ELECIRONICS
Victor A. DeMarines
President and CEO
The MITRE Corporation
Bedford, MA 01730
~0009
From: TREASURV PUBLIC AFFAIRS
1997 U.S. SAVINGS BONDS
VGL0~T~~~
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p. 17 of 99
COMMITTEE
ENTERTAINMENT
INDUSTRIAL MANUFACTURING
*Sherry Lansing
Chairman and CEO
Paramount Pictures Corp.
Hollywood, CA
Richard L. Bready
Chai~an and CEO
Nortek, Inc.
Provide:'lce, RI
FINANCIAL SERVICES
INSURANCE
*Muriel Siebert
President and Chairwoman
Muriel Siebert & Co.
New York, NY
*Edward B. Rust, Jr.
President and CEO
State Farm Insurance Companies
Bloomington, IL
GLASS & BUILDING MANUFACTURING
LABOR
Roger G. Ackerman
Chairman and CEO
Corning Inco~orated
Corning, NY
Jorw P. Sweeney
Presic.e:1t
American Federation of Labor
Congress of Industrial
Organization
Was:::"ng<:on, DC
HEALTH SERVICES
Jean Moore
President and CEO
Harris County Hospital
Distric.t
Houston, TX
*~ois
PETROLEUM, COAL & REFINING
Peter I. Bijur
Chairman and CEO
Texaco Corporation
White Plains, NY
HIGHER EDUCATION
PUBLIC TRANSPORTATION
*Dr. William H. Cunningha~
Chancellor
The University of Texas System
Austin, TX
*
serving a second year
Patrick J. Moynihan
Ge:2eral Manager
Massach~setts Bay
Transpor~ation Authority
Boston, ~.A
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BO~IDS
1-15-97 5:02pm
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VOLUNTEER COMMITTEE
RETAIL FOODS
TEXTILE AND APPARELS
*Ronald E. Johnson
Chairman, President and CEO
Kash N'Karry Food Stores, Inc.
Tampa, FL
*John C. Adams
Chairman, President and CEO
Russell Corporation
Alexander City, AL
SCHOOLS
UT~LITIES
*David E. Sawyer
Superintendent
Breva~d County Boa~d of
Education
Viera, FL 32940
*John W. Rowe
President and CEO
New England Electric System
Westboro, MA
ATLANTA
STATE GOVERNMENT
The Ecnorable Lincoln Almond
Governor
State of Rhode Island
Providence, RI
Ronald W. Allen
Chairman and CEO
Delta Air Lines, Inc.
Atlanta, GA
SURPACE TRANSPORTATION
BALTIMORE
Thomas M. Downs
Chairman ar.e President
Amtrak
Washi:1gton, DC
*Ivan M. Stern
Chairman, President and CEO
Allied Signal Technical
Services
Columbia, MD
STEEL
BOSTON
Paul J. Wilhelm
President
US Steel Group
Pittsburgh, FA
* serving a seoond year
Joh..l"l P. Hami 11
President Fleet Bank of
Massachusetts, N.A.
Boston, MA
From: TREASURY PUBLIC AFFAIRS
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1997 U. S. S1>.Vr:NGS BONDS VOLUNTEER COMMITTEE
CINCINNATI
PETROIT
William R. Burleigh
President and CEO
The E.W. Scripps Company
Cincinnati, OH
*Anthony F. Earley, Jr.
President and COE
Detroit Edison Company
Detroit, MI
CLEVELAND
HOUSTON
George S. Brookes
President
Huntington Bank~ Noyther~ Ohio
Region
Cleveland, OH
Lois Jean Moore
President and CEO
Harris County Hospital
District
Houston, TX
COLUMBUS
LOS ANGELES
William J. Lhota
Executive Vice Pres:dent
American Electric Power
Columbus, OH
John M. Leonis
Chief Executive Officer
Litton Industries
Woodland Hills, CA
DALLAS
MIAMI
William E. McCarthy
President of Catalogue,
Distribution and
Non-Resale Purchasin~
J. C. Penney Company, !~C.
Plano, ':'X
*Dr. Richard H. Hinds
Assistant Superintendent of
Schools
Dade County Public Schools
Miami, FL
NEW JERSEY
DENVER
Richard McCormick
Chairman and CEO
U.S. West, Inc.
Englewood, CO
* serving a second year
*Dennis Baldassari
President
GPU Energy
Reading, PA
'0:
From: TREASURY PUBLIC AFFAIRS
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1997 U.S. SAVINGS BONDS
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VOLu~TEER COMMITT~~
NEW YORK
ST. LOUIS
*Frank A. Be~nack, Jr.
President and CEO
The Hearst Corporation
New York, NY
*Nicholas L. Redinq
ViCe Chairman
Monsanto Company
St. Louis, MO
PHOENIX
SEATTLE
*Markos Tambakeras
President, Industrial
Automation & Control
Honeywell Inc.
Phoenix, AZ
Phyllis J. Campbell
President and CEO
U.S. Bank of Washi~~~o~
Seattle, WA
WASHINGTON, DC
PHILADELPHIA
James J. Morris
Vice Preside~t and General
Manager
Boeing Defe~se and Space
Group/Helicopters
Division
Philadelphia, PA
PITTSEURGH
Thomas w. Golonsk~
Preside:1t
National City Bank of
Pennsylvania
pittsburgh, PJ!..
PORTLAND
Gerry B. Cameron
Chairman and CEO
U. S. Bancorp
Portland, OR
* serving a eecond year
Philip A. Odeen
President and CEO
BDM International, Inc.
McLean, VA
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I{ \
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlDNGTON, D.C•• 20220 _ (JOt) 611.2960
Making 'Welfare-to-work' Work
Remarks to the Kennedy School Forum
Secretary Robert Rubin
December 12, 1996
What I would like to do today is to discuss what I think is an absolutely key domestic
issue in this country faces, an issue which I think will profoundly affect all of us; and, that is,
bringing the residents of the inner cities into the economic mainstream. This is a subject that
I've care an enormous amount about for a long time and in my view it is a subject which will
take on a special urgency in the next few months, because it is closely related to the debate
over welfare reform.
As you well know, the President signed the welfare reform bill this fall, but at the same
time said the bill contains serious flaws, but those flaws he will do everything possible to fix.
And let me say right now, that conventional wisdom notwithstanding, we do not accept the
notion that because of the nature of Congress this bill cannot be fixed. President will fight
with every ounce of energy he has, and all of us will fight with him, to try to fix this bill. And
if I may add as a practical political fact, that in the give and take of all the things that are
going to wind up in Congress, there will be a lot of opportunity, I believe, to try to do things
to make this welfare bill a better bill. As you know, the welfare reform bill was not simply a
welfare reform bill, it was also a bill that dealt with legal immigrants and it was a bill that
dealt with food stamps. And it is in those two areas that the critical problems arose, and it is
those two areas that we need to address, redressing this legislation.
Having said that, there is a great deal more that we need to do to make welfare reform
really work, other than simply fixing this bill. What we need to do is to put in place the
programs that will have the effect of providing jobs for those who move from welfare to work.
And that, in tum, is part of a larger issue of economic development in the inner cities, and
moving the residents of the inner cities into the economic mainstream. And that in my view,
RR-141O
--------------------~---------------------------------------------------Fur f1"ss reietues, speeches, public sdtedules and official biographies, can our 24-hour fax line at (202) 622-2040
--------------------------,--------------~------------~------------------
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and it is a view I've had for a long time, is a matter of fundamental importance for all of us,
no matter what are incomes may be, or where we may live.
As some of you know, I worked at a major investment banking firm for 26 years.
When I did so 1 worked on the kinds of things I now deal with as Secretary of the Treasury:
taxes, the economy, markets, level of the dollar t Glass-Steagal, international trade, banking
and the like. But I also developed the view a long time ago, and it was largely the result of
reading a very influential book about fifteen years ago, that until we bring the residents of the
inner cities into the economic mainstream, all of us - no matter where we live or what our
incomes may be -- would be powerfully disadvantaged; that we lose tremendously the potential
for our economy and in a worsening of our social conditions because of these tremendous
problems that have historically not been dealt with in this country. Just think of the enormous
difference in costs that are borne by the taxpayers, and think of the enormous differences in
productivity, and in the quality of life for all of us, if we can break the cycle of poverty and
equip the urban poor to join the economic mainstream.
Being in the White House for two years, and now at Treasury for two years, has given
me an extraordinary and rare opportunity to act on these issues, but all of us, no matter where
we are or what we are doing, can contribute in a meaningfully way. Our Chief of Staff at the
Treasury, for example, tutors an inner city school kid, a trader I know on Wall Street acts as a
big brother to two kids, and others help rehabilitate houses, mentor small businesSes, volunteer
in medical clinics. Ben Nye has led the effort at Treasury to work with two local high schools
to bring kids in as interns to the Treasury Department. The possibilities are endless, and'if all
of us really cared and acted, in my judgement, the aggregate effect could be enormous.
And that is exactly what we need: a true marshaling of national will and effort, and one
of the things I have hoped and tried to do is to have some effect on that, that is to say, the
unexpected fact of a Secretary of the Treasury discussing the inner cities as a critical aspect of
the economic life of this country, I hope will reinforce those who are involved, and maybe
spark an interest on the part of some of those who are not involved.
There are programs that work, contrary to some popular conceptions -- federal, state
and local. But in an era of tightly constrained budgetary resources, we must choose rigorously
and then once we've made our choices, we must have the will to bring these programs to
critical mass. There are also very interesting things happening around the country, and some of
you know a great deal more about them then I do, in which local con\munity groups have
worked with the government programs to create environments in which businesses are making
economic choices to come back into the inner cities. I was in Los Angeles not too long ago
and met a woman named Juanita Tate, who was working with a community development
corporation, which I think was called Concerned Citizens for South Central L.A. What they
have done is they have taken a brownfields site, environmentally contaminated site. They have
used a program to get that back into some kind of shape. They set up a selection and training
program for inner city residents, and by creating this environment, they have now gotten
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commitments from developers and manufacturing businesses such that they were going to have
an industrial park, and it was fully leased, and all of this was from businesses that have made
purely economic decisions to locate in the inner city, instead of going elsewhere. Those are the
kinds of programs that we at Treasury are trying for, results we are trying to understand,
because if you can figure out how that sort of thing worked, then you can try to replicate it
around the country.
To start with however, success with our inner cities requires sustained economic
growth that creates jobs and through a high level economic activity, increases standards of
living, because of the demand for labor that accompanies a high level of growth. I think too
often those focused on the issues of the inner city, issues of the poor do not focus adequately
on the imperative of a good economy for their purposes. Conversely, I also think that too
often those who are focused on creating a good economy do not adequately recognize all else
that is needed to overcome poverty.
Today, America is in the midst of a sustained economic recovery and has the best
conditions we have seen in at least 30 years: strong job creation, low unemployment, low
interest rates, low inflation. Moreover, even in the central cities, the effect is being felt in
terms of falling unemployment, and to some extent, increasing standards of living. Having
said a1 that, it is all too apparent that too many people and too many places in our inner cities
are in trouble and are not being reached - or are being reached far too little - and that far too
many people are still caught up in the cycle of poverty that I mentioned before.
The statistics tell us what we already know. The Committee for Economic
Development, a respected business policy group, tells us that one third of the neighborhoods in
our 100 largest cities are distressed or in danger. The Organization for Economic Cooperation
and Development, the OECD, ranks us number one, at the top, of a list of 16 industriruized
nations in income disparity. That same study shows that poor U.S. children are poorer than
the children in most other Western industrialized nations. This is not a prescription for a
healthy economy or a healthy society for any of us.
These are urgent problems. With the welfare bill now law, we must even more
urgently ask and answer these questions: Where will the jobs for the poor come from? How
do you produce the economic conditions necessary to create them? How do you equip the poor
to be job-ready, so that they have the training and social skills to take the jobs once you have
figured out how to make the jobs available?
I tend to think of the requisites for moving forward fall into three categories.
The first, and probably most important, is what could, broadly speaking, be called
investment in people. And that includes education and training at all levels, not only skill
training but social skill training, Head Start, to adult skill and technical training. It includes
decent housing, and it includes health care.
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The second category is public safety, and the President has made this a high priority
through the Brady Bill, the assault weapons ban and the program to put police back on the
streets. Public safety is a precondition to economic activity.
The third is access to private sector capital and other measures to create economic
activity in the inner cities. This has received relatively little public attention, but is critical to
revitalizing America's distressed cities.
The last two decades have seen enormous innovations in fmance and in the financial
markets. Ideas that were unknown on Wall Street have now become commonplare. Fiuancia1
markets in the United States are today the most innovative, the broadest and deepest in the
world.
But, having said all that, we still have a severe shortage of financial institutions and a
shortage of credit to create housing and jobs in the inner city. Robert Kennedy once said, liTo
ignore the potential contribution of private enterprise is to fight the war on poverty with a
single platoon, while great armies are left to stand aside."
The Treasury Department has been deeply and energetically involved in bringing its
broad-based experience in capital markets and financial services to bear on the inner city, and
we have pursued action, not rhetoric, on an eight point program which I'd like to very briefly
discuss with you.
Step one was to reform and thereby make more effective the Community Reinvestment
Act, which encourages banks to provide capital throughout the community to creditworthy
borrowers. After having reformed this program, we then had to fight off a serious
congressional effort to eviscerate or undermine the CRA.
The second step was to make the Low Income Housing Tax Credit permanent. And
then to defend that credit against congressional efforts to eliminate it.
The third step is to follow through on President Clinton's call in 1992 for a nationwide
network of community development banks. We have now put in place a community
development bank program. We have begun the first grants to institutions around the country.
I think it is an enormously promising program. We are fighting to inorease the funding, and
last year, we had to stave off a congressional effort to defund the community development
bank program.
The fourth is an idea we borrowed from abroad. The [ust lady came back with this idea
when she traveled to Asia and that is expand micro-enterprise loans. Those are very small
loans to people who want to set up very small private businesses in the inner cities. We think: it
is a very promising idea and we are promoting it through our community development bank
program.
4
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The fifth step is a proposed new tax incentive to clean up abandoned industrial
properties in economically distressed areas -- so called brown fields tax incentives. When we've
ask mayors, MWhat would you most like us to do?" this has tended to be the number one item
on their lists, to provide the tax incentives to put environmentally contaminated areas in the
inner cities back into productive use. We have proposed a $2 billion dollar program. We
estimate that would give us $10 billion in private leverage, and that we can resurrect 30,000
brownfields sites around the country.
Sixth, we've introduced legislation for 100 new Empowerment Zones and Enterprise
Communities. Let me add one comment on that program, if I l'l"?y. 'Vhen we started out on
that program, I discussed it with the Vice-President. I said, "I wonder how much good this is
really going to do." He said, "In addition to all else, one of the things that you will see it do, is
you will see it draw together the various components of these communities as they apply for
these grants. And it will have enormous effect, even on the communities that lose." I was
skeptical. He turned out to be right, and that has been one of the great by-products of this
program.
Seventh, something that I have personally gotten myself quite involved in, is to try to
increase the involvement of the private sector in mentoring private business. It is all well and
good to have access to capital, all well and good to try to better enable the residents of the
inner cities, or those who want to come into the inner cities to do business to set up small
businesses, although we all know the failure rate of small businesses is fairly high under, the
best of circumstances, and these are not necessarily the best of circumstances. Therefore, it
seemed to us, that what we should do is to encourage business to provide on a pro-bono basis
mentoring for these small businesses. There is a lot of that going on around the country, and
we want there to be more going on around the country.
Number eight is still very much a work in progress. I'm not sure that this is something
we can figure out how to do. But we are making a joint Treasury and Commerce effort to see
if we can create secondary markets for the loans to the inner cities that are on the books of
public and private institutions. For if we can do that, they we can enable these institutions to
sell those loans, receive cash back, and take that cash and lend it once again into the inner
cities. In other words, we can recycle the capital that is available for inner cities, and by doing
so substantially increase the available capital for inner cities. Intellectually and practically this
is a very tough challenge. We have not yet figured it out, but I hopel~at with the fullness of
time, we will get an effective program in place.
Most of these programs have been under attack by some in Congress, as I mentioned a
moment ago, including efforts to eviscerate CRA and to eliminate the low income housing tax
credit and the community development bank program. We have fought vigorously against
those efforts and successfully. My hope is that as we go forward now, there will be much
more of an effort to reach common ground, between ourselves and the Republican majority,
and that as consequence we will move constructively on balanced budget and other areas and
5
From: TREASURY PUBLIC AFFAIRS
20009
1-15-97 5:09pm
p. 26 of 99
the efforts to undermine these kinds of programs will be a thing of the past. In any event, I
believe we must do all possible both to defend these programs, and for the programs that
work, to expand them.
Let me also mention a recent piece of legislation that has not attracted any attention,
but could have significant economic and social effects. Last year, Congress, in an effort to
save money, ordered, and I think rightly, that all federal payments (except tax refunds) be
made electronically by 1999. However, and here is the nub of the problem, there are
approximately 10 million Americans who receive Social Security, veterans, or other
government checks and don t have bank accounts. So, we at Treasury have to figure out how
\0 arrange for electronic funds transfer for those ten million people, the 10 million
"unbanked." Many of whom, by the way, today use expensive check cashing services to get
hold of cash, which is in itself a disadvantage to them. If we can figure out a way to get them
into the banking system for the first time, not only will it give them a more efficient way to
cash checks and access to other financial services, but it may also encourage people to save, to
plan financially, and therefore, to improve their economic life over time. It is, we think, a real
opportunity to have an effect on a very large number of people in the inner city through the
implementation of the electronic funds transfer legislation of last year.
I
Let me conclude, if I may, by returning to where I began. The President, as I said, is
going to be fighting to complete the job of welfare reform: to fix critical elements of the
welfare bill and to implement his we1fare-to-work jobs initiative. And more broadly, we will
all be working together in the administration to move forward on the programs that equip the
residents of the inner city for the economic mainstream, that improve public safety, and that
increase access to capital. If you take all this together and bring it to critical mass, I believe it
is a strategy that does give us the opportunity to make a real break from the past and truly
bring America s distressed communities into the economic mainstream.
I
These tasks are urgent and now, when America is enjoying a durable economic
recovery, is the time to address these tasks in a vigorous way. The adage is right -- fix the roof
when the sun is shining.
If we make the right decisions in our public and private sectors, in my view, and those
right decisions include dealing with what I described a moment ago as the very central problem
of our domestic society, I believe this country, with its many economic strengths, can have a
robust economic future for as far in the years ahead as one can see. But to realize that
potential, we must, for all of our sakes, band together to overcome a historical legacy , the
problems of our inner cities and to bring the residents of the inner cities into the economic
mainstream. It wonlt be easy; it won't be quick; but it can be done, and it must be done,
again, for the benefit of all of us.
Thank you.
-306
20009
From: TREASURY PUBLIC AFFAIRS
1-15-97 5:10pm
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
December 16, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $13,020 million of· 26-week bills to be issued
December 19, 19SC ;;:'1.': '~C mature June 19, 1997 were
accepted today (CUSIP: 9127944Nl).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Discount
Rate
Low
High
Average
4.97t
4.99\'
4.99t
Investment
Rate
5.17%
S.19t
5.19t
Price
97.487
97.477
97.477
Tenders at the high discount rate were allotted 41t.
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
Received
TOTALS
$42,363,695
Accepted
$13,019,545
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign'Official
Institutions
TOTALS
4.98 -- 97.'82
RR-l4.11
$35,992,228
$5,517,450
1.130,628
$6,648,078
3,491,067
3,491,067
2,880,400
$42,363,695
2,880,400
$13,019,545
$34,861,600
1. 130,628
p. 27 of 99
UBLIC DEBT NEWS
Department of the Treasury •
Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
December 16, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $13,006 million of 13-week bills to be issued
December 19, 1996 and to mature March 20, 1997 were
accepted today (CUSIP: 9127944C5).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
4.74%'
Investment
Rate
4.86%'
4.77~
4.90~
4.76%-
4.88%-
Price
98.802
98.794
98.797
Tenders at the high discount rate were allotted 25~.
The investment rate ~s the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
4.75 - 98.799
RR-1412
Received
$47,614,159
Accepted
$13,006,259
$42,052,264
1,434,852
$43,487,116
$7,444,364
1.434,852
$8,879,216
3,473,243
3,473,243
653,800
$47,614,159
653,800
$13,006,259
DEPARTMENT
OF
THE
TREASURY
NEWS
TREASURY
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960
Engaging Abroad for a Stronger Economy At Home
Remarks by
Jeffrey R. Shafer
Undersecretary for International Affairs
Baton Rouge, Louisiana
December 13, 1996
It is a pleasure to be here in Baton Rouge today to represent the Treasury at this
important conference on tax reform.
Let me say at the outset that I am not a tax specialist, I am an economist. What I
would like to talk about today are some of the broad issues that will shape our future and
should guide our thinking on tax and economic matters. We live in a world where distances
are shrinking and borders are expanding. So a global perspective is essential. But I want to
keep squarely in our sights, our interests as Americans. In particular, I would like to talk
about what we in the administration are doing to open up markets abroad, why international
engagement is important ~o strengthening those markets and what we must do at home to take
full advantage of more open and more dynamic markets abroad. Tax policy is an important
tool in dealing with the latter and I'll have a few words to say about how it fits in.
I. Opening Up Markets Abroad
Here in Louisiana. I douht 1 ha\'l.:
Ame~ican economy
to
tell anyonc ahout how important trade is to the
A simple story illustrates this point. Somc timc ago. 1 was asked by Senator Breaux to
look into financing by the Ex-1m hank of a development project in Ghana. The project
involves building generators to provide electricity in Ghana. And you might wonder why
people here in Louisiana wen: concerned ahoul ,nmclillng laking place half way around the
world.
The reason was that the project im'ol\'e" mounting generators on barges and those
barges will be built right here in Loui"iana. Thc financin!..! was straightened out and the
project is on track. And as the upshot. it all goc" \\cll. people in Ghana will enjoy electricity
who didn't before, and jobs will he cn:ated hen: in Louisiana,
~
-
-
~
But this area's stake in trade is much hroaoer. In fact. today, the Ports of South
Louisiana, New Orleans and Baton Rouge are the country's largest, handling more freight than
RR-1413
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
the ports of Houston. New York and Valdez. Alaska combined.
Progress in opening up markets that will buy American exports is of central importance
to our economy. Our objective must be to insure that foreign governments dismantle trade
restrictions and that we in government provide cost-effective support for American business.
You all know how committed this Administration has been to opening markets through
trade agreements -- completing the Uruguay Round. or through our Framework Agreement
with Japan, which is bringing Japanese market -barriers down way down or through N AFT A
The critical priority now is to move forward on the vision to create a "free trade area
throughout the Americas.
Without doubt, Louisiana is particularly well positioned to take advantage of freer
trade. One of the world's fastest growing markets lies right on the region's doorstep. That
market is Latin America. To give you an idea of the size of this market:
•
•
•
Chile, with 14 million people. buys more from us than India with 920 million.
We sell more to the countries that make up the common market of MERCOSUR
(Brazil, Argentina, Uruguay and Paraguay) than we do to China.
We sell about as much to Costa Rica. with three million people. as we do to all of
Eastern Europe. with about 100 million.
All told Latin America and the Carihhean purchased some $92 billion of American
goods in 1994. almost as much as did the European Union. These exports support hundreds
of thousands of American jobs. The market~ of this hemisphere will grow enormously as the
process of reform continues. and as prosperity continues to spread in our hemisphere. Export
markets are dramatically increasing opportunities for l JS firms.
•
U.S. firms now export more [han 5800 hillion. enough to support more than 10 million
U.S. jobs. And these are good johs that pay roughly 15 percent more than average,
non-trade jobs.
II. Strengthening Markets Through International Eng.lgement
Opening up markets that han: heen closed to American products is one way to
strengthen America's economy Bu! \\C ;Irc ;11"(1 I(l\lkin~ 1(11" ways to promote growth in the
size of these markets.
The Treasury is expanding 1l~ ne[work or rt:la!l()nship~ in which we can push for progrowth policies. We've long heen en~a~eJ wnh Europe and Japan in the G-7. the G-lO and
the OECD But the fastest growing ll1arket~ no" are ebt:\\'here in Asia and in Latin America.
We want to see this growth susta1l1ed and [0 ha\t: (lUr workers and husinesses benefit from it.
We want [(1 see Latin American countrle~ hreak OU! 01 [he cycles of growth and crisis. We
want to see Asian economies hreak Iret: (11 [ht: l()n"tra1l1ts oj inadequate infrastructure. This
2
calls for sound monetary and fiscal policies. for financial market development and for financial
market supervision to keep instability in check. We're working on these issues in APEC, with
countries around the Pacific and in the Committee on Hemispheric Financial issues set up after
the Miami Summit of the Americas.
Indeed, it was in New Orleans that the Financial Ministers of the Americas met last
spring to work on these issues together.
Bilaterally, my tax policy colleagues are also actively negotiating new and updated tax
treaties.
•
We recently concluded a treaty with Switzerland. culminating a 17-year effort to update
that treaty.
•
And, we recently signed our first tax treaty with Thailand, a process in which we
overcame what, at first. appeared to be significant differences.
This engagement is helping to strengthen support for pro-market policies, for prosavings measures, for privatization for balanced budgets. for low-inflation--in short, for progrowth policies. But countries need support to follow through and we need to leverage our
scarce money to secure this support.
The single best way we have to leverage our efforts is through organizations where we
playa predominant role. The international financial institutions such as the World Bank are
outstanding examples or organization that give us a huge return on a contribution of only about
one tenth of each cent that the federal gO\'ernment spends. These organizations embody the
values that we believe in. And around the glohe. they have helped reform government policies
and strengthen markets--markets which are now providing enhanced opportunities for US
firms.
•
Investment in these bodies has pro\"en extremely cost effective.
The multilateral development banks are leveraged ways for America to accomplish its
economic security -objectives.
On average. for every dollar we devote. we see four dollars of effects.
•
•
Because of their leverage. the IFls account for well over half of all overseas
assistance in crucial areas like environmental protection, health, and support for
privatization.
•
As the largest sharelwlder III these Illslltutlons. we are well-positioned to insure
that their policies conf(1rl11 Wllh ours.
In addition. the International hnancial Institutions can help reduce the risks that lie
overseas.
They can reduce the risk of war h~ creatmg the conditions of peace. Moreover, many
other ills including money laundering. drug trallickmg. and international crime flourish when
3
the effective functioning of nation states breaks dO\vn. All of these are exacerbated when
poverty spurs on desperate populations. or economic malfunctioning destroys the governmental
institutions which anchor the rule of law.
While it would be the naive to think that wealth alone makes nations happy, is it an
accident that after a half-dozen wars in a hundred years. Europe enjoyed a long period of
peace after 1945?
I would argue that Europe's stability since 1945 has much to do with the economic
vision shown on both sides of the Atlantic after the war. Today. as we look to those regions
that remain essential for American security. we must draw on that same vision.
It is clear, that the prospects for stability in Eastern Europe and the former Soviet
Union have much to do with those vast lands making a successful transition to market
economics and prosperity.
For example, they are playing the central role in guiding Russia and the other nations
of the former Soviet Union to market-based prosperity. and with it. democracy.
It is very much in our national security interest. and must be a paramount goal of that
interest, to anchor the economic foundations on which foreign nations' stability and cohesion
rest. While some oppose support of the international financial institutions, this administration
is commined to pursuing this leveraged means to help not only the rest of the world, but
America itself by strengthening overseas markets and improving our economic security.
III. Preparing At Home For the Global Economy
This Administration has heen fully committed (0 a policy of international engagement.
The President has made it clear that he helieves in leadership. not retreat in the international
arena and that we have nothing to fear from the rest 0\ the world.
But to guarantee future leadership. we must take the steps we need at home to preserve
those sources of advantage in order to negotiate economically from a position of strength.
•
•
•
That means first and foremost investing in our human capital and giving people the
tools they need to compete on ~I t;l\"orahlt: playing field with those abroad.
It means encouraging S;l\lng" III ~I\e AmerIcan husiness the capital it needs to invest in
plant and equipment that make pellplt: more productive and able to command higher
salaries.
And it means investing in technology. the catalyst tor economic growth.
These three ingredients. people. capital and technology are what economists of all
political stripes agree are the component" 0\ growth And they are. to a large degree, what we
are talking about when we look at our hudget and system of taxes.
4
Accordingly, the President has put forth a number of tax initiatives to promote
investment in people, fonnation of capital and better technology.
People
The President has fought to save existing investments in education and has put forth
new·ones. For example, he has proposed ...
•
a $10,000 tax deduction for post secondary school education.
•
a $1,500 tuition tax credit for the first two years of post-secondary education: and
•
a ten percent income tax credit for small business for employee education and training:
and
•
for employees, a pennanent extension of the Section 127 exclusion for employerprovided educational assistance.
To help move people from welfare to work. the President has proposed a new welfareto-work tax credit for employers that hire certain long-term welfare recipients. Under the
proposal ...
•
Employers could receive a credit rate of 50 % instead of 35 % for eligible workers.
•
The credit would apply to the first $10.000 (instead of $6,000) of wages and run up to
two years.
•
Eligible wages would include certain employer-provided education. health care and
dependent care.
•
The existing work opportunity tax credit would also be expanded to include adults no
longer eligible for food stamps under the welfare reform bill.
Savings and Capital
The President, as you well know. has hrought the hudget deficit down four straight
years in a row on the way to zero. And he's fought against radical plans that would burst a
hole in the deficit. Reducing the deficit frees up capital for investment and tends to· lower long
term interest rates. making capital mon: a\'ailahle {() American companies.
Having cut our national rate of dis-savings. however. we must now boost our rate of
personal savings. particularly as tht.: Bahy Boomers prt.:part.: to retire.
•
•
The President's Retirement Sa\'ings and Securit;. Act would hegin the work of raising
saving and enhancing pension cn\eragt.: to make ~ure we have the funds needed to
invest for our future hy i) t.:xpanJIng penslnn,. il) II1crt.:asing portahility. and iii)
enhancing protections. so that hanJ-\l,orkIng Amt.:ricans do not have to worry about
whether their retirement savIngs will he thert.: when they need them.
A new Treasury investment vehick. inflation Inot.:xed securities which will debut next
month. also promise to help Americans sa\t.: tor their future by guaranteeing them a
fixed level of income or principal value alter inflation.
The major asset of many Amencan
tamllit.:~ 1<,
their home.
•
The President has proposed a targeted proposal that provides an exclusion of up to
$500.000 of capital gain for the sale of a principal residence for married taxpayers
filing jointly or $250.000 for other taxpayers.
•
This proposal would make it easier for people to decide to sell their home when
they have to move for any reason.
•
We estimate that it would cut the number of taxpayers paying capital gains tax
on residences from about 150.000 per year to less than 10.000 per year or only
about one quarter of one percent of all housing sales.
Technology
It's widely agreed that technology is responsible for up to half of economic growth.
•
Accordingly. we continue to support extension of the R&E tax credit. fought to save
funding for programs such as the Advanced Technology Program, and are studying
other ways to accelerate technology development.
Small business
Let me add that the President's 1997 budget also proposed ways to help small business
including ...
•
Estate tax relief by increasing the amount of property eligible for a favorable rate from
$l.0 to $2.5 million as well as other improvements:
•
And we were successful in raising the allowance for the expensing of investment in
depreciable property from 517.500 up to 525.000.
These ideas will advance an economic strategy that has heen producing great results:
•
•
•
•
Export growth has averaged 6.3 percent yearly since 1992. more than double GDP
growth.
America has generated almost ele\'en million new johs. giving us a 5.4 percent
unemployment rate -- down from 7 . .3 percent when the President took office, the lowest
rate in years.
Wages are rising. at a 3.9';; annual rate. hut with no indication that inflation is starting
to heat up as a result. In fact core inflation at 2.8 ';; is running below last year's figure.
Our continuing trade deficit. e\en with strong export growth. is a sign that we need to
finish the job of balancing the hudgt:t and . . a\ing more to meet our investment needs
without incurring the need tl1 horrow ahroad. The President's initiatives move us in
just this direction.
Conclusion
In conclusion. the glohal econOIl1: oilers new and immense opportunity. But we must
not take the adoption of free market pnm:iple . . hy more and more nations for granted.
6
The Twentieth century has been called the American Century precisely because it was a
time when we looked outward and fought hard for market principles. By continuing to look
outward and to working to keep markets open, we can help guarantee that the next century
will be an American century as well.
7
DEPARTMENT
OF
THE
'IREASURY (W)
TREASURY
NEW S
178'l
OFFlCE OF PUBUC AFFAIRS • 1500 PENNS'\:"LVANlA AVENUE. N.W .• WASllNGTON. D.C.. 20220. (202) 622·2960
EMBARGOED UNTIL 2; 30 P. H .
December 17, 1996
CONTACT;
Office of Financing
202/219-3350
TRKASURY's WE:EKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $26,000 million, to be issued December 26,
1996. This offering will provide about $1,250 million of new cash
for the Treasury, as the maturing weekly bills ar~ outstanding in
the amount of $~4,743 million.
Federal Reaerv@ Banks hold $7,029 million of the maturing
bills for their own accounts, which may be refunded within the
offering amount at the weight~d average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $4,933 million as agents for
foreign and international monetary authorities, which may be
refunded within the offering amount at the weighted average
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.
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 ottering of Treasury securities
is governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356) for the sale and issue by the
Treasury to the public of marketable Treasury bills, notes, and
bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
RR-1414
HIGHLIGHTS OF TRBASORY OPP'XRDlGB OF W1I:nLY BILLS
TO BE ISSUED DBCKMBER 26, 1996
December 17, 1996
Of to ring Amount .
DelcriDtiOQ of Offering:
$13,000 million
$13,000 million
Term and type of security
CUSIP number
Auction date
Issue date
Maturity date
Original issue date
Currently outstanding
Minimum bid amount
Multiples .
91-day bill
912794 40 3
December 23, 1996
December 26, 1996
March 27, 1997
September 26, 1996
$11,549 million
182-day bill
912794 2R 4
December 23, 1996
December 26, 1996
June 26, 1997
June 27, 1996
$19,596 million
$10,000
$ 1,000
$ 1,000
'""'
~
'""'
1\'
~
-J
&bgy.,
of Sids:
Noncompetitive bids
Competitive bids
d
,
'""'
~
$10,000
TbO CQllowiDQ rulo. apply to .11 •• ~iti •• mentiog.a
~UbmiBBiQn
,"'
Maximum R~cognized Bid
at a Single Yield
~
Maximum Award .
1J
Receipt of Tenders:
~
Noncompetitive tenders
Competitive tenders
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10\.
(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 $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.
~
~
35t of public offering
35t of public offering
lD
~....
1J
Prior to 12:00 noon Eastern Standard time
on auction day
Prior to 1:00 p.m.
on
auction
drlV
Eastern Standard time
~
UBLIC DEBT NEWS
Department of the Treasury •
Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
December 18, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 2-YEAR NOTES
Tenders for $18,250 million of 2-year notes, Series AN-1998,
to be issued December 31, 1996 and to mature December 31, 1998
were accepted today (CUSIP: 9128272D3).
The interest rate on the notes will be 5 3/4%". All
competitive tenders at yields lower than 5.874~ were accepted in
full.
Tenders at 5.874~ were allotted 16~. All noncompetitive and
successful competitive bidders were allotted securities at the yield
of 5.874~, with an equivalent price of 99.769.
The median yield
was 5.850~; that is, 50~ of the amount of accepted competitive bids
were tendered at or below that yield. The low yield was 5.800%";
that is, 5~ of the amount of accepted competitive bids were
tendered at or below that yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Received
$40,633,658
Accepted
$18,250,058
The $18,250 million of accepted tenders includes $1,340
million of noncompetitive tenders and $16,910 million of
competitive tenders from the pUblic.
In addition, $1,450 million of
high yield to Federal Reserve Banks
international monetary authorities.
of tenders was also accepted at the
Reserve Banks for their own account
securities.
RR-1415
tenders was awarded at the
as agents for foreign and
An additional $875 million
high yield from Federal
in exchange for maturing
1-15-97 5:10pm
From: TREASURY PUBLIC AFFAIRS
20009
p. 28 of 99
NEWS
'IRE,ASURY
omCE OF PUBI Ie AFFAIRS • 1500 PENNSYLVANIA AVENUE. N.W•• WASHINGTON. D.C. • 20220 • (20%) 622·2960
--~~~~~~~~~~~~~~~~~~~--~---------------
Contact:
FOR IMMED' ATE RELEASE
December 18, 1996
Howard Schloss
(L0?) fl"''''7?910
RUBIN NAMES MICHAEL FROMAN TREASURY CHIEF OF STAFF
Treasury Secretary Robert E. Rubin announced Wednesday he has named Michael
B.G. Froman as Chief of Staff of the Treasury Department, replacing Sylvia Mathews.
"Michael Froman has made tremendous contributions at Treasury and the NEC,"
Secretary Rubin said. "He will be a great asset as Chief of Staff. I will depend upon him
heavily to continue to playa major role in policy making and the day-to-day operation of the
Treasury Department as we embark on the next four years of this administration. "
Mr. Froman has served as Treasury Deputy Assistant Secretary (Eurasia and the
Middle East) in the Office of International Affairs since December 1995. From January 1993
to December 1995, he was Director for International Economic Affairs at the National
Economic Council and the National Security Council at the White House. From September
1992 to January 1993, Mr. Froman served in the White House Office of Economic Policy.
Mr. Froman has also worked for the American Bar Association's Central and East European
Law Initiative, the European Commission, the Departments of State and Defense and practiced
law in the District of Columbia and Tokyo, Japan.
Mr. Froman graduated summa cum laude from Princeton University with a B.A. in
Public and International Affairs. He also holds a doctorate in international relations from
Oxford University and is a magna cum laude graduate of Harvard Law School where he was
"
an editor of the Harvard I.aw Reyjew and a staff member of the Harvard
Internatjonal law
JOllrnal. Mr. Froman was born and raised in San Rafael. CA.
Secretary Rubin also named Sandra K. Mancini to the position of Deputy Chief of
Staff. She has been at Treasury since July 1994 and is currently Senior Advisor to the Chief
of Staff and White House Liaison. Previously Ms. Mancini worked at the National Economic
Council at the White House and at the Presidential Transition Headquarters. She holds a B. A.
and J.D. from the Catholic University of America in Washington, DC. Ms. Mancini is
originally from Scotch Plains, N.J.
-30-
DEPARTMENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C .• 20220. (202) 622-2960
THE FDIC IMPROVEMENT ACT OF 1996:
WHAT HAS WORKED AND WHAT HAS NOT
Richard Scott Carnell
Assistant Secretary of the Treasury
for Financial Institutions
Brookings Institution Conference on
FDICIA: Bank Reform Five Years Later
and Five Years Ahead
December 19, 1996
The initial response to the FDIC Improvement Act of 1991 was chilly, to say the
least. Treasury Secretary Brady called FDICIA a "pale shadow of the fundamental reforms
... that the nation's banking system so badly needs." The Wall Street J0W7U11 repOIted the
widely held view that FDICIA "may undermine banks further." President Bush criticized the
legislation as "do[ing] little more than provide critical funding to the Bank Insurance Fund,"
and he warned that "[t]his shortsighted congressional response to the problems we face
increases taxpayer exposure to bank losses." The December 19 enactment date -- three
weeks after Congress adjourned -- in part reflected the President's decision to sign the bill
privately. with no media event and no champagne. History does not record whether he held
his nose.
Many bankers denounced FDICIA as the epitome of regulatory burden. Banking
lawyers and consultants characterized it as gratuitously punitive. Asked about FDICIA,
Federal Reserve Governor John LaWare "could only shake his head," saying "How they had
the audacity to call it an 'improvement act' I'll never understand." And my good friend
Karen Shaw declared: "This legislation creates a system of arbitrary, Draconian and
inflexible regulatory criter:ia designed to ensure that no bank will ever again fail. In pursuit
of this Quixotic goal, the legislation will ensure that while few banks will ever fail, none will
ever prosper.
Well. a funny thing happened on the way to the fiasco.
Depository institutions have prospered since FDICIA's enactment. For example,
commercial banks' return on assets has more than doubled. It was 0.53 percent in 1991 and
0.93 percent in 1992, and has ranged between 1.15 percent and 1. 20 percent since then.
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
RR-1417
2
Banks' return on equity rose from 7.94 percent in 1991 to 14.4 percent this year. Banks'
ratio of core capital to tangible assets increased more than 20 percent, from 6.48 percent in
1991 to the current level of 7.79 percent. The percentage of commercial banks reporting net
losses plummeted by two-thirds, from 11.6 percent in 1991 to 3.75 percent now .. Aggregate
commercial bank net income rose to a record $32.0 billion in 1992 (surpassing the previous
high of $24.8 billion set in 1988) and went on to set new records in each successive year:
$43.1 billion in 1993; $44.6 billion in 1994; and $48.8 billion in 1995.
Not only has bank profitability increased but failures and problem cases have fallen to
a tiny fraction of prior levels. In 1991, the FDIC closed or bailed out 127 institutions
insured by the Bank Insurance Fund, with $63 billion in assets. In 1992, the agency resolved
another 122 failed BIF members,. with $44 billion in assets. By contrast, so far this year,
failure has claimed 5 BIF-member institutions, with $190 million in assets. Likewise, the
FDIC's 1991 problem list included 1,089 BIF-member institutions, with over $600 billion in
assets -- one-sixth of the assets of all BIF members. Today, that list has shrunk to 93
institutions, with $8 billion in assets - less than 0.2 percent of the assets of all BIF members.
BIF's fund balance rose from negative $7 billion at the end of 1991 (negative 0.36 percent of
insured deposits) to over $26 billion this past September (1.32 percent of insured deposits).
As George Kaufman declared here four years ago, "If this be death by regulation,
what a way to go!"
Now I'm certainly not suggesting a simple one-to-one correlation between this turnaround and FDICIA's reforms. Depository institutions benefited greatly from a favorable
interest-rate environment during 1992 and 1993, and from the economic recovery of the past
four years. Moreover, we should see FDICIA itself as part of a process that began with the
Financial Institutions Reform. Recovery, and Enforcement Act of 1989 and included the
tightening of bank supervision in 1989-91. That tightening reduced losses and increased
profits in the ensuing years. Depository institutions also benefited from the closure of
hundreds of insolvent thrift mstitutions that had bid up rates paid on deposits, bid down rates
charged on loans, and undercut credit standards.
FDICIA: What Is Important and What Is Not
FDIClA differed from most previous U. S. banking legislation in that it consciously
sought to change the incentives confronting depository institutions' owners, managers, and
regulators. Specifically, it sought to align those incentives more closely with the interests of
the federal deposit insurance funds and the taxpayers.
As I and others have explained on previous occasions,l the pre-FDIClA system of
IFor a detailed discussion of how FDICIA sought to ameliorate perverse incentives, see Carnell,
"A Partial Antidote to Perverse Incentives: The FDIC Improvement Act of 1991," .Anmtal Review of
3
federal deposit insurance and depository institution regulation inadvertently encouraged
depository institutions' owners, managers, and regulators to act in ways that hanned the
insurance funds. It created perverse incentives for owners and managers to take excessive
risks and for regulators to forbear and overextend ·the federal safety net. FDICIA' s most
important refonns -- such as prompt corrective action, risk-based premiums, and least-cost
resolution - represent a coherent effort to correct those perverse incentives.
These incentive-oriented reforms constitute the heart of FDICIA. They are what is
important in the Act. And, to the extent that they have been implemented, I believe that they
have worked. They have helped create a better set of incentives. They have reduced the
potential for moral hazard. And they have helped regulators be more faithful agents of the
taxpayers.
Regulators' Implementation of FDICIA's Key Reforms
One of the challenges of our topic this morning - what in FDICIA has worked and
what has not -- is that we have not gone through a full economic cycle with FDICIA in
effect. FDICIA became law as the economy was touching bottom during the last recession.
The two years preceding its enactment also saw significant tightening of bank supervision.
Moreover, prompt corrective action took effect one year after enactment, when the economy
was already beginning to recover. So we don't know for certain how things will work. We
can't know for certain -- that's why we call it the future. So far, so good.
But I'm troubled by the argument that FDICIA's limits on regulatory discretion will
have draconian consequences - and pose an acute risk of a meltdown- the next time that the
financial system comes under stress.
Let's look at the argument more closely. It has two fundamental assumptions. First,
that provisions like prompt corrective action and least-cost resolution impose such severe
constraints on regulatory discretion that they will, all too often, force regulators to take
actions that are self-defeating. And second, that regulators can do nothing to avoid getting
caught in such a bind. In my view, neither assumption is true.
I'll focus here on the first assumption. as applied to prompt corrective action.
FDICIA's prompt corrective provisions impose relatively modest constraints on regulatory
discretion. 2 Only a few of the rules are categorical. For example, an undercapitalized
institution cannot pay dividends. Most of the rules involve some degree of regulatory
Banking /...avv 12 (1993): 317-71; and "The Culture of Ad Hoc Discretion," in Assessing Bank
Reform: FDICIA One Year Later, ed. George G. Kaufman and Robert E. Litan (Washington, D.C.:
The Brookings Institution, 1993).
2Carnell, "A Partial Antidote to Perverse Incentives: The FDIC Improvement Act of 1991,"
Annual Review of Banking law 12 (1993): 349-50.
4
discretion -- generally involving ·authority to make exceptions if following the rule would not
help avoid or minimize loss to the insurance fund. Quite a few rules are purely
discretionary. So critics err in characterizing FDICIA as a mechanistic attempt to eliminate
regulatory discretion.
The fact is that prompt corrective action;, like FDICIA's other key reforms, relies
heavily on regulators and regulatory discretion. That reliance follows naturally, and in some
ways unavoidably, from the use of conventional historical-cost accounting data to defme
depository institutions' capital for purposes of prompt corrective action. Capital is
intrinsically a lagging indicator of problems. Traditional historical-cost accounting principles
accentuate the lag. The upshot is uncertainty about a troubled institution's market value.
Because of that uncertainty, prompt corrective action provisions generally give regulators
some leeway to make a judgment about the institution's condition and prospects and take
actions sooner, or later, than accounting numbers might suggest. By the same token, the
statute did contemplate that regulators, in the course of implementation, would develop some
limits on their own discretion beyond the minimum prescribed by the statute.
Perhaps the most striking common thread in the regulations implementing FDICIA' s
key reforms is their minimalism. They generally do the minimum that the statute requires,
and no more. In many ways, this minimalism is not surprising. To begin with, there is still
remarkably little appreciation of the ways in which unconstrained discretion, coupled with the
federal safety net, tended to create perverse incentives for regulators to forbear and
overextend the safety net. Thus it's natural for regulators, like other people, to resist limits
on their discretion.
Second, FDICIA became law also during a crisis in the fmancial system and (as
previously noted) during a recession. It took a crisis to overcome normal complacency -- and
the normal inertia of the legislative process. But regulators naturally wanted to take care not
to exacerbate the fmancial crisis or credit-availability problems. Hence a reinforced interest
in keeping their options open.
Third, regulators accorded great weight to bankers' complaints about regulatory
burden. These complaints in part reflected a reaction to FIRREA and the heightened
stringency of bank supervision. They also reflected bankers' perception that they were, in
effect being penalized for the excesses of the thrift industry. As a result, regulators tended to
be cautious and sparing in implementing FDICIA's key reforms.
As a matter of history. the minimalist implementation of those reforms is
understandable enough. But what of the future? FDICIA contemplated that regulators would
continually strive to strike a bener balance between the costs and benefits of safety-andsoundness regulation. I believe that we need to be careful to make sure that we do not
squander the beneficial incentive-effects of FDICIA's key reforms by succumbing to
complacency - and thereby leaving depository institutions needlessly vulnerable to future
stress.
UBLIe DEBT NEWS
Department of the Treasury •
Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
December 19, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 5-YEAR NOTES
Tenders for $12,508 million of 5-year notes, Series R-2001,
to be issued December 31, 1996 and to mature December 31, 2001
were accepted today (CUSIP: 9128272E1).
The interest rate on the notes will be 6 liB%-.
All
competitive tenders at yields lower than 6.165~ were accepted in
full.
Tenders at 6.165% were allotted 27%. All noncompetitive and
successful competitive bidders were allotted securities at the yield
of 6.165~, with an equivalent price of 99.830. The median yield
was 6.150%; that is, 50% of the amount of accepted competitive bids
were tendered at or below that yield. The low yield was 6.110%-;
that is, 5~ of the amount of accepted competitive bids were
tendered at or below that yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Received
$34,899,190
Accepted
$12,507,580
The $12,508 million of accepted tenders includes $412
million of noncompetitive tenders and $12,096 million of
competitive tenders from the pUblic.
In addition, $850 million of tenders was awarded at the
high yield to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $600 million
of tenders was also accepted at the high yield from Federal
Reserve Banks for their own account in exchange for maturing
securities.
DEPARTMENT
'IREASURY
OF
THE
TREASURY
NEWS
OFFlCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C.• 20220 • (202) 622-2960
FOR Th1MEDIATE RELEASE
December 23; 1996
Contact: Darren McKinney
(202) 622-2960
TREASURY ACTS AGAINST FLOW OF DIRTY MONEY TO COLOMBIA
Treasury Under Secretary for Enforcement Raymond W. Kelly said Monday that federal
authorities investigating a money laundering method in the New York metropolitan area have
seized more than $29 million in illicit funds being sent to Colombia.
The anti-money laundering initiative was instituted against money remitters involved in
specific transactions with Colombia. About 3,500 money remitter agents in the New York
metropolitan area have been subject to reporting requirements under the geographical targeting
order, known as a GTO.
Issued under the authority of the Bank Secrecy Act (BSA), a key anti-money laundering
law, a GTO is used to impose stricter reporting and recordkeeping requirements on specified
financial service providers in a certain geographical area for a limted time period. The GTO
requires the remitters in question to obtain and report identifying information about the parties to
all remittances of cash to Colombia of $750 or more. The order will remain in place until
February 2, 1997.
The GTO was requested by U.S. Attorneys for the Eastern District of New York, the
Southern District of New York and the District of New Jersey, along with senior enforcement
officials of the U.S. Customs Service and Internal Revenue Service. It is designed to assist the EI
Dorado Task Force, a multi-agency anti-money laundering task force comprising federal, state
and local law enforcement authorities. The request for the GTO was made to the Treasury's
Financial Crimes Enforcement Network (FinCEN). which administers the BSA.
"Money remitters in the New York area funneled more than $1.5 billion to Colombia last
year. Colombian drug cartels have been proven to use money remitters in the New York
metropolitan area to launder their drug profits." Mr Kelly said. "Treasury Secretary Rubin has
made fighting money laundering a top priority of this department. The results of the New York
GTO provide Treasury with an opportunity to make a real difference in the fight against money
laundering by moving quickly and decisively against abuses of the money remitter industry."
Remitters are businesses which receive money from customers and remit these funds to
designated recipients, often located overseas Evidence gathered by law enforcement identified
the state-licensed money remittance companies and their agents in the New York metropolitan
area that were particularly vulnerable to abuse by cartel money launderers.
(more)
RR-1419
Far press releases, speeches, public schedules and official biographies, call our 24~our fax line at (202) 622-2040
-2-
Much of the foundation to justify the GTO was laid during investigations of several money
remitters and their agents in New York. On July 24, 1996, Vigo Remittance Corp. pleaded guilty
to structuring financial transactions to avoid standard BSA reporting requirements. Earlier this
month, Remesas America Oriental was indicted for activities related to money laundering.
Numerous other agents and their employees have been successfully prosecuted for money
laundering over the past few years.
"In addition to virtually halting the movement of narcotics proceeds to Colombia through
most New York area money remitters, including many remitters not covered by the GTO, the
GTO confirmed the suspicion that the proceeds sent through these money remitters were
controlled by Colombian cartels," Mr. Kelly said.
The GTO has dramatically reduced the flow of narcotics proceeds through money
remitters in New York City to Colombia. For example:
•
•
•
Several of the transmitters targeted under the GTO have stopped sending funds to
Colombia.
Many others are sending significantly lower amounts than they were before the GTO.
Currency seizures have dramatically increased. Seizures from JFK Airport during the first
half of the GTO period were nine times higher than they were during the same period in
1995 and seizures have continued at rates significantly higher than they were during
comparable periods in past years.
"Based on the success of the GTO, and the analysis that FinCEN is conducting in
cooperation with other law enforcement agencies, it is clear that we need to consider other
applications of geographical targeting orders, as well as broader, more permanent regulatory steps
to address vulnerabilities in the money remitter industry," said Stanley E. Morris, Director of
FinCEN.
-30-
UEPARTMENT
OF
THE
TREASURY
NEWS
'IREASURY
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C.• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
December 23, 1996
Contact: Darren McKinney
(202) 622-2960
UNITED STATES-INDONESIA TAX PROTOCOL RATIFIED, IN FORCE
The Treasury Department announced Monday that the United States and Indonesia have
exchanged instruments of ratification for a Protocol amending the Income Tax Convention that
has existed between the two nations since 1990.
Signed in Jakarta by Secretary of State Warren Christopher and Indonesian Minister of
Foreign Affairs Alatas Ali Abdullah on July 24 of this year, the Protocol has since been ratified by
both countries and enters into force with today's exchange of instruments.
The Protocol reduces from 15 percent to 10 percent the withholding rates on direct
investment dividends, interest payments and royalty payments. The previously higher rates
significantly exceeded those found in Indonesia's income tax treaties with other OECD nations,
placing U.S. businesses at substantial disadvantage in Indonesia relative to global competitors.
The new, lower rates will help level the playing field for U. S. businesses in a region of dynamic
economic growth. The lower rates ultimately will benefit both the Unites States and Indonesia by
fostering increased trade and investment between them.
-30-
RR-1420
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
December 23, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $13,008 million of 13-week bills to be issued
December 26, 1996 and to mature March 27, 1997 were
accepted today (CUSIP: 9127944D3).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
4.88%'
4.93\'
4.92%-
Investment
Rate
5.01%'
5.06\'
5.05%-
Price
98.766
98.754
98.756
Tenders at the high discount rate were allotted 3~.
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Received
$36,854,814
Accepted
$13,008,114
$31,429,731
1. 310,148
$32,739,879
$7,583,031
1.310,148
$8,893,179
Federal Reserve
Foreign Official
Institutions
TOTALS
3,504,235
3,504,235
610,700
$36,854,814
610,700
$13,008,114
4.89
4.90
RR-1421
98.764
98.761
4.91
98.759
1-15-97 5:11pm
From: TREASURY PUBLIC AFFAIRS
20009
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
FOR IMMEDIATE RELEASE
December 23, 1996
202 -219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $13,073 million of 26-week bills to be issued
December 26, 1996 and to mature JWle 26, 1997 were
aooepted today (CUSIP: 9127942R4).
OF ACCEPTED
COMPETITIVE BIDS:
RANGE
Discount
Rate
Low
High
Average
Investment
Rate
5.06~
5.26\'
s.oa%-
5.29%'
S.29%-
s.oat
Price
97.442
97.432
97.432
Tenders at the high discount rate were allotted 40t.
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
Reoeived
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
5.07 -- 97.437
RR-1422
Aooepted
$45,578,901
$13,073, 003
$37,631,920
1. 043,881
$38,675,801
$5,126,022
1,043,881
$6,169,903
3,525,000
3,525,000
3.378.100
$45,578,901
3.378,100
$13,073,003
p. 29 of 99
From: TREASURY PUBLIC AFFAIRS
20009
1-15-97 5:13pm
p. 31 of 99
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
SUMMARY OF TREASURY INFLATION-INDEXED SECURITIES
The Treasury Department has flDalized rules setting out the terms and conditions for the new IntlationIndexed Securities that will be auctioned in January 1997. The frnal rules, which will be published in
the Federal Register, adopt without substantive change the proposed rules that were published for
comment on September 27, 1996. Eight comment letters were received in response to the proposed rules.
The following is a summary of the key provisions of the frnal rules and features of the new securities.
•
The inflation-indexed securities will be structured similarly to the Real Return Bonds issued by
the Government of Canada.
•
The interest rate, which is set at auction, will remain fIXed throughout the term of the security.
•
The principal amount of the security will be adjusted for inflation, but the inflation-adjusted
principal will not be paid until maturity.
•
SemiannuaJ interest payments will be based on the inflation-adjusted principal at the time the
interest is paid.
•
The index for measuring the inflation rate will be the non-seasonally adjusted U.S. City Average
All Items Consumer Price Index for All Urban Consumers (CPHJ), published monthly by the
Bureau of Labor Statistics (BLS).
•
The auction pr0Cess will use a single price auction method that is the same as that currently used
for 2-yea.r and 5-yea.r Treasury notes.
•
The securities will be eligible for stripping into their principal and interest components in
Treasury's Separate Trading of Registered Interest and Principal of Securities (STRIPS) program.
•
At maturity, the securities will be redeemed at the greater of their inflation-adjusted principal or
par amount at original Issue. The payment of an additional amount at maturity, if necessary, to
ensure that the inflation-adjusted principal plus the additional amount equals the par amount at
original issuance is different than the mi.!'imum guarantee provision that Treasury was considering
in the Advance Notice of Propused Rulemaking.
•
The first auction of inflation-indexed securities, a lO-year note, will be held in January 1997, and
quarterly thereafter.
•
If, while an inflation-indexed security is outstanding, the CPI is (1) discontinUed, (2) in the
judgment of the Secretary, fundamentally altered in a manner materiall~ adverse to the interests
of an investor in the security, or (3) 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,
Treasury, after consulting with the BLS, will substitute an appropriate alternative index.
•
Regulations addressing the tax treatment of inflation-indexed securities will be issued by the IRS
shortly. Generally, the interest payments will be taxable when received, which is consistent with
the tax treatment of other Treasury securities. The inflation adjustments to the principal wilI be
taxable in the year in which such adjustments occur even though the inflation adjustments will not
be paid until maturity.
December 30, 1996
P F P \ R T :\, E
~
T
0 F
TilE
'IREASURY (.)
1500 PE~~SYL\A:\L\
AVE~lTE.
T R E .\ S lJ R \'
NEW S
:\.\\ .• WASHINGTON. D.C.· 20220· (202, 622-2960
EMBARGOED UNTIL 12:00 NOON
December 24, 1996
CONTACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately S27,000 million, to be issued January 2,
1997. This offering will result in a paydown for the Treasury of
about Sl,575 million, as the maturing weekly bills are outstanding
in the amount of $28,570 million.
Federal Reserve Banks hold $7,l61 million of the maturing
bills for their own accounts, which may be refunded within the
offering amount at the weighted average discount rate of accepted
competitive tenders.
Pederal Reserve Banks hold $5,422 million as agents for
foreign and international monetary authorities, which may be
refunded within the offering amount at the weighted average
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.
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 (31 CFR Part 356, as amended) for the sale and
issue by the Treasury to the public of marketable Treasury bills,
notes, and bonds.
Details about each of ~he new
attached offering highlights.
000
Attachment
RR-1423
8ecur~ties
are given in the
HIGHLIGHTS OF TRRABURY OPFERINGS OF WEEKLY BILLS
TO BR ISSUED JANUARY ~, 1997
December 24, 1996
:J
1.
I
Jl
!
J
\
Jl
J.i
JI
JI
JI
Qffering Amount .
Delcription gf offeringl
$13,500 million
$13,500 million
Term and type of security
CUS I P numbe r
Auction date
Issue date
Maturity date
Original issue date .
CUrrently outstanding
Minimum bid amount
Multiples .
91-day bill
912794 2N 3
December 30, 1996
January 2, 1997
April 3, 1997
April 4, 1996
$32,615 million
$10,000
$ 1,000
1B2-day bill
912794 5D 2
December 30, 1996
January 2, 1997
July 3, 1997
January 2, 1997
!h9 follgwing rule,
~pply
Submiasion of Bids:
Noncompetitive bids
~
It
~
Competitive bids
\
(j)
cr
W
Il::
I-
l'
It
to all BeCYhitie. mentioged above,
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10\.
.
(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 $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 Single Yield
35% of public offering
W
J
Maximum Award .
)5% of public offering
I-
Receipt of Tenders:
Noncompetitive tenders
IJ)
tTl
I
1
N
1
(.)
W
Q
Competitive tenders
Payment Terms . .
$10,000
$ 1,000
Prior to 12:00 noon Bastern Standard time
on auction day
Prior to 1:00 p.m. Eastern Standard time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
o
federal financing
WASHINGTON, D.C
20220
bankNEWS
December 27, 1996
FEDERAL FINANCING BANK
Charles D. Haworth, Secretary, Federal Financing Bank (FFB),
announced the following activity for the month of November 1996.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $58.9 billion on November 30,
1996, posting a decrease of $2,129.8 million from the level on
October 31, 1996. This net change was the result of a decrease
in holdings of agency debt of $1,691.7 million, in holdings of
agency assets of $375.0 million, and in agency guaranteed loans
of $63.1 million.
FFB made 14 disbursements during the month of
November, and 10 RUS-guaranteed loans were repriced.
FFB also
received 11 prepayments in November.
Attached to this release are tables presenting FFB November
loan activity and FFB holdings as of November 30, 1996.
RR-14, ..
<D
C1l
N
ll)
N
N
N
~
0
~
N
N
N
<D
N
0
o
(/)
~
Cl.
N
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fE
u..
Page 2 of 3
FEDERAL FINANCING BANK
NOVEMBER 1996 ACTIVITY
BORROHER
DATE
INTEREST
RATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
$50,000,000.00
$150,000,000.00
$175,400,000.00
11/5/96
11/19/96
11/19/96
5.288% S/A
5.290% S/A
5.426% S/A
AGENCY DEBT
U.S. Postal Service
U.S. Postal Service
U.S. Postal Service
11/4
11/15
11/18
GOVERNMENT - GUARANTEED LOANS
GENERAL SERVICES ADMINISTRATION
Chamblee Office Building
Chamblee Office Building
Foley Square Office Bldg.
Oakland Office Building
Atlanta CDC Office Bldg.
Foley Square Courthouse
Miami Law Enforcement
S/A
S/A
S/A
S/A
S/A
S/A
S/A
11/8
11/15
11/22
11/22
11/29
11/29
11/29
$39,837.21
$126,319.64
$439,036.00
$3,765.83
$3,699.73
$239,459.00
$2,206.08
4/1/97
4/1/97
7/31/25
9/5/23
9/2/25
7/31/25
1/3/22
5.367%
5.355%
6.531%
6.526%
6.542%
6.542%
6.525%
11/18
$7,642,334.02
11/2/26
6.572% S/A
11/15
11/21
11/27
11/27
11/27
11/27
11/27
11/27
11/27
11/27
11/27
11/27
11/27
$4,160,000.00
$11,772,000.00
$3,000,000.00
$1,378,267.43
$673,154.65
$641,992.10
$119,246.29
$10,797,836.98
$1,892,007.66
$11,836,710.42
$2,354,285.13
$3,604,838.64
$11,913,507.02
1/3/23
12/31/98
12/31/29
1/2/18
1/2/18
1/2/18
1/2/18
1/2/18
1/2/18
1/2/18
1/2/18
1/2/18
1/2/18
6.481%
5.750%
6.491%
6.410%
6.410%
6.410%
6.410%
6.410%
6.410%
6.410%
6.410%
6.410%
6.410%
GSA/PADC
ICTC Building
RURAL UTILITIES SERVICE
Alabama Electric #386
Dairyland Power #388
Central Iowa Power #442
@South Miss. Elec. #090
@South Miss. Elec. #090
@South Miss. Elec. #090
@South Miss. Elec. #090
@South Miss. Elec. #171
@South Miss. Elec. #171
@South Miss. Elec. #171
@South Miss. Elec. #171
@South Miss. Elec. #171
@South Miss. Elec. #171
S/A is a semi-annual rate:
@ interest rate buydown
Qtr. is a Quarterly rate.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 3 of 3
FEDERAL FINANCING BANK
(in millions)
Program
Net Change
FY '97 Net change
11/1/96-11/30/96
10/1/96-11/30/96
November 30, 1996
October 31, 1996
$ 1,821.8
4,804.4
0.0
6,626.2
$ 1,821.8
5,996.2
500.0
8,317.9
Agency Assets:
FmHA-RDIF
FmHA-RHIF
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Rural Utilities Service-CBO
Small Business Administration
sub-total*
3,675.0
18,325.0
5.5
18.8
4,598.9
0.1
26,623.3
3,675.0
18,700.0
5.5
18.8
4,598.9
0.1
26,998.3
0.0
-375.0
0.0
0.0
0.0
0.0
-)75.0
0.0
-375.0
0.0
0.0
0.0
0.0
-375.0
Government-Guaranteed Loans:
DOD-Foreign Military Sales
DoEd-HBCU
DHUD-Community Dev. Block Grant
DHUD-Public Housing Notes
General Services Administration +
DOl-Virgin Islands
DON-Ship Lease Financing
Rural utilities Service
SBA-state/Local Development Cos.
DOT-Section 511
sub-total*
3,231.8
0.2
37.8
1,561.4
2,341.6
19.9
1,382.8
16,772.2
312.0
12.3
25,672.0
3,244.5
0.2
37.8
1,626.8
2,342.0
19.9
1,382.8
16,753.3
315.0
12.7
25,735.0
-12.7
0.0
0.0
-65.4
-0.4
0.0
0.0
18.9
-3.0
-0.4
-63.1
-15.4
0.0
-1.4
-65.4
9.3
0.0
0.0
21.6
-6.4
-0·1
-58.0
Agency Debt:
Export-Import Bank
Resolution Trust Corporation
U.S. Postal Service
sUb-total*
grand-total*
*figures may not total due to rounding
+does not include capitalized interest
=========
=========
$ 58,921.5
$ 61,051.3
$
0.0
-1,191.7
-500.0
-1,691.7
=========
$ -2,129.8
$
0.0
-1,191.7
-1.500.0
-2,691.7
=========
$ -3,124.8
DEPARTMENT
OF
THE
tiR\
lREASURY (~
TREASURY
NEW S
ornCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIllNGTON, D.C.• 20220. (202) 622·2960
Contact:
FOR IMMEDIATE RELEASE
December 30, 1996
Jon Murchinson
(202) 622-2960
TREASURY ANNOUNCES YEAR-END TAX TREATY DEVELOPMENTS
The Treasury Department provided an update Monday on the status of various income
tax agreements. Two new agreements entered into force on December 30, 1996, while the
termination of two other agreements becomes effective as of January 1, 1997.
Instruments of ratification were exchanged in Washington today with respect to a
bilateral tax treaty and protocol between the United States and Kazakstan. The new treaty
terminates the application to Kazakstan of the provisions of a tax treaty between the United
States and the Union of the Soviet Socialist Republics that was signed June 20, 1973. The new
treaty generally will be effective with respect to withholding taxes on February 1, 1997, and
for matters other than withholding tax for taxable periods beginning on or after January 1,
1996.
Also on December 30. Instruments of ratification were exchanged in the Hague with
the Kingdom of the Netherlands with respect to a protocol which would have the effect of
phasing out the remaining applicahle provisions of a 1948 U.S.-Netherlands tax treaty as
extended to the Netherland'. Antilles. The treaty is being phased out in such a manner that
interest on deht instrument'. hacking Eurohonds issued by Netherlands Antilles subsidiaries of
U.S. companies prior to Octoher 15. 1984. will continue to qualify for treaty benefits.
On January 1.1997. the U.S. tax treaty with Malta and the extension to Aruba of the
1948 U.S.·Netherlands tax treaty shall ce~\'.e to have effect pursuant to notices of termination
deli\'ered In 1495.
-3()-
RR-14:25
For press releases. speeches. public schedules and official biographies, call our 24-hour fax line at (202) 622·2040
I
DEPARTMENT
OF
THE
TREASURY
NEWS
'IREASURY
1500 PE"JNSYLVA"lIA AVENUE. N."".· WASHINGTON. D.C.· 20220· (2021622-2960
EMBARGOED UNTIL 2:30 P.M.
CONTACT:
December 27, 1996
Office of Financing
202/219-3350
TREASURY'S 52-WEEK BILL OFFERING
The Treasury will auction approximately $19,250 million
of 52-week Treasury bills to be issued January 9, 1997. This
offering will provide about $350 million of new cash for the
Treasury, as the maturing 52-week bill is currently outstanding
in the amount of $18,910 million. In addition to the maturing
52-week bills, there are $27,781 million of maturing 13-week and
26-week bills.
Federal Reserve Banks hold $12,007 million of bills for
their own accounts in the maturing issues. These may be refunded
at the weighted average discount rate of accepted competitive
tenders.
Federal Reserve Banks hold $5,588 million of the maturing
issues as agents for foreign and international monetary authorities. These may be refunded within the offering amount at the
weighted average 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. For purposes of determining such additional
amounts [ foreign and ~nternational monetary authorities are
considered to hold none of the matur~ng 52-week issue.
Tenders for the bills will be rece~ved at Federal
Reserve Banks and Branches and at the Bureau of the Public
Debt, Washington. D.C. This offerlng of Treasury securities
is governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, as amended) for the sale and
issue by the Treasury to th~ public of marketable Treasury bills,
notes, and bonds.
Details about the new securlty are given in the attached
offering highlights.
oOe
Attachment
RR-1426
HIGHLIGHTS OF TREASURY OFFERING OF 52-WEEK BILLS
TO BE ISSUED JANUARY 9, 1997
December 27, 1996
Qff~ring
Amount .
.
.
.
$19,250 million
.
Description of Offering:
364-day bill
Term and type of security
CUSIP number
Auction date
Issue date
Maturity date
Original issue date
Maturing amount . . .
Minimum bid amount
Multiples . . . . .
912794 40 4
2, 1997
9, 1997
8, 1998
9, 1997
$18,910 million
$10,000
$1,000
January
January
January
January
Submission of Bids:
Accepted in full up to $1,000,000
at the average discount rate of
accepted competitive bids
(1 ) Must be expressed as a discount rate
with two decimals, e.g., 7.10t
(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
$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.
Noncompetitive bids
Competitive bids
Rec9gAized Bid
at a Single Yield
Max~
Maximum Award .
.
35% of public offering
3S~
.
of public offering
Receipt of Tenders:
Noncompetitive tenders
Prior to 12:00 noon Eastern Standard
time on auction day
Prior to 1:00 p.m. Eastern Standard
time on auction day
Competitive tenders . .
Payment Terms .
<::e-d
.l.S
:3
.
.
666
.
.
. .
.l.a::3a
Full payment with tender or by charge
to a funds account at a Federal
Reserve bank on issue date
From: TREASURY PUBLIC AFFAIRS
20009
I) I· P \ I{'I "
F '\ T
() I·
I' II F
1-15-97 5:12pm
p. 30 of 99
'I I{ I. \ S ( H Y
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANJAAVENUE, N.W. - WASIUNGTON. D.C. - 20220 - (202) 621-2960
Contact:
FOR IMMEDIATE RELEASE
December 30. 1996
Jon Murchinson
(202) 622-2960
TREASURY TO ANNOUNCE FIRST INFLATION-INDEXED SECURITY AUCTION
The Treasury Department announced Monday that the first inflation-indexed note
auction will be held in January. 1997. It is anticipated that the official offering announcement
will be released on January 21, 1997, with the auction to be held on January 29, 1997. The
inflation-indexed notes will be issued on February 6, 1997 and dated January 15, 1997.
Complete details about the offering will be provided in the official offering announcement.
To receive the final regulations from Treasury's automated fax system call
(202) 622-2040 and request document number 1428. The regulations can also be accessed on the
Bureau of Public Debt's web site: www.publicdebt.treas.goY.
The January reference CPI numbers and daily index ratios will be released on Tuesday,
December 3 I, 1996.
-30-
RR-1427
For press rdeases,
speeches, public schedules
. and oJIicial biographies, caU our 24~our fax line at (202) 622-2040
BILLING CODE: 4810-39-W
DEPARTMENT OF THE TREASURY
FISCAL SERVICE
31 CFR 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)
AGENCY: Bureau of the Public Debt, Fiscal Service,
Department of the Treasury.
ACTION: Final rule.
SUMMARY: The Department of the Treasury ("Department" or
"Treasury") is pub2.ishing in final form an amendment to 31
CFR
Pa~t
356
(Uniform
Offe~ing
Circular for the Sale and
Issue of Marketable Book-Entry Treasury Bills, Notes, and
Bonds).
This amendment makes changes necessary to
accommodate the public
offe~ing
of new Treasury inflation-
indexed securities by the Department.
In addition, the
amendment makes certain technical clarifications and
conforming changes.
7he proposed rule was published for
public comment on September 27, 1996.
EFFECTIVE DATE:
[Inse~t
date of publication in the Federal
Register. )
ADDRESS: This rule has been made available for downloading
from the Bureau of the Public Debt web site at the following
RR-1428
2
address:
www.publicdebt.treas.gov.
FOR FURTHER INFORMATION CONTACT: Ken Papaj
(Director), Lee
Grandy, Chuck Andreatta or Kurt Eidemiller (Government
Securities Specialists), Bureau of the Public Debt,
Government Securities Regulations Staff,
(202) 219-3632.
SUPPLEMENTARY INFORMATION:
I.
Background
31 CFR Part 356, also referred to as the uniform
offering
circula~,
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.!
The Department has decided to offer a new type of
security, referred to as a Treasury inflation-illdexed
security," whose principal value will be adjusted for
inflation as
measu~ed
by the United States Government.
! The uniform offering circular was published as a
rule on January 5, 1993 (58 FR 412). Amendments to the
were published on June 3, 1994 (59 FR 28773), March 15,
FR 13906), July 16, 1996 (61 FR 37007), August 23, 1996
43626), and October 22, 1996 (61 FR 54908).
The
final
circular
1995 (60
(61 FR
= This Part is being revised to accommodate offerings of
both inflation-indexed notes and inflation-indexed bonds in order
to give the Department the flexibility to issue both types of
securities in the future.
However, the Department initially
plans to offer only one maturity, a 10-year note.
Inflationindexed securities were referred to as inflation-protection
securities in the proposed rule.
3
Department believes the issuance of these new inflationindexed securities will reduce interest costs to the
Treasury over the long term and will broaden the types of
debt instruments available to investors in U.S. financial
markets.
As explained in more detail below, after considering
the comments provided, Treasury has determined that the
structure of the inflation-indexed securities will remain
unchanged from its description in the proposed rule.
The
securities will be based, with some modifications, on the
model of the Real Return Bonds currently issued by the
Government of Canada.
The principal of the security will be
adjusted for changes in the level of inflation.
Semiannual
interest payments will be made based on a constant rate of
interest determined at auction.
The index for measuring the
inflation rate for these securities will be the nonseasonally adjusted U.S. City Average All Items Consumer
Price Index for All Urban Consumers ("CPI" or "CPI-U")
published monthly by the Bureau of Labor Statistics of the
U.S. Department of Labor.
Further, the Department has announced its intention to
begin auctioning inflation-indexed securities in January
1997 and quarterly thereafter.
lO-year inflation-indexed notes.
The first auction will be of
Specific terms and
conditions of each issue, including the auction date, issue
date, and public offering amount, will be announced prior to
4
each auction.
Over time, the Department expects to offer
additional maturities of inflation-indexed securities, such
as 30-year bonds or shorter-term notes.
The Department
expects to offer the first additional maturity later in
1997.
The inflation-adjusted principal value of the
securities can be obtained for any date by multiplying the
stated value at issuance, or par amount, by the index ratio
applicable to
tha~
date.
CPI applicable to a
The index ratio is the reference
pa~ticular
valuation date divided by the
reference CPI applicable to the original issue date.
The
inflation adjustment to the principal will not be payable
until maturity,
greater of their
amount.
The
whe~
the securities will be redeemed at the
in:lat~on-adjusted
secu~ities
principal amount or par
will be issued with a stated rate of
interest that remains constant until maturity.
Interest
payments for a particular security will be determined by
mUltiplying the
the stated
ra~e
ir.:la~ion-adjusted
0:
i~~erest
principal by one-half of
on each semiannual interest
payment date.
Inflation-indexed notes will be issued with maturities
of at least one year but not more than ten years.
Inflation-indexed bonds, when offered, will be issued with
maturities of more than ten years.
The inflation-indexed
securities will be sold at discount, par, or premium and
will pay interest semiannually.
The auctions for inflation-
5
indexed securities will be conducted as single-price
auctions in which competitive bidders will bid in terms of a
desired real yield (yield prior to inflation adjustment) ,
expressed as a percentage with three decimals, e.g., 3.230%.
The interest rate established as a result of the auction
will generally be set at one-eighth of one percent
increments that produce the price closest to, but not above,
par when evaluated at the highest real yield at which bids
were accepted.
The offering announcement issued by the
Department for each new inflation-indexed security will
contain the specific details for that offering.
The
infla~io~-i~dexed
securities will be eligible for
the STRIPS program (Separate Trading of Registered Interest
and Principal of Securities) immediately upon their issuance
by the Treasury.
The securities will also be eligible to serve as
collateral for Treasury programs (e.g., Treasury Tax and
Loan accounts).
~~yone
indexed securities fer
contact the
i~~erested
suc~
Departme~t/s
in the use of inflation-
collateral purposes should
Office of the Fiscal Assistant
Secretary for more information.
The Department also intends
to make components stripped from these securities eligible
for collateral at a later date.
The Department will notify
the public of their eligibility when the valuation of the
stripped components for collateral purposes has been
determined.
6
II.
Comments Received in Response to the Proposed Rule
The Department published for public comment a proposed
amendment to the uniform offering circular on September 27,
1996,3 which laid out the proposed structure,
design, terms,
and conditions of the new inflation-indexed security_
closing date for comments was October 28, 1996.
The
A few minor
typographical and technical errors in the proposed rule text
and formulas were subsequently corrected and changed in a
correction notice published on October 4, 1996.
~
In developing the proposed rule, the Department took
into consideratior: the numerous comments, suggestions, and
recommendations that were received in response to two
Advance Notices
0:
?roposed Rulemakings;5 at more than 30
meetings attended by IT.8re than 800 investors, dealers and
interested parties in nine cities world-wide; and at a
public symposium sponsored by the Department.
The
Department believes that this extensive discussion with, and
participation by, market participants in the design of the
inflation-indexed
developing a new
sec~rity
inves:me~t
was extremely useful in
product that will have wide
acceptance and broad market appeal.
The Department received eight letters from seven
~
61 FR 50924
(September 27, 1996)
61 FR 51851
(Oc~obe~
5 61 FR 25164
1996) .
4,
1996).
(May 20, 1996) and 61 FR 38127 (July 23,
7
cornmenters in response to the proposed rule.o
The letters,
listed chronologically in order of date received, were
submitted by Apex Investment Associates, Inc.; Reed Smith
Shaw & McClay; Wrightson Associates; L. Napoleon Cooper (two
letters); Robert L. Elgin; HSBC Securities, Inc.; and PSA
The Bond Market Trade Association. 7
Two commenters proposed an entirely different security
structure.
One of these commenters submitted a proposal
that would allow for a new series of federal debt, and would
result in a substantially different structure.
The other
commenter proposed a structure for, and suggested features
to be incorporated
i~,
a non-marketable, floating rate,
inflation-indexed savings bond.
A third commenter expressed
support for the process of involving market participants in
the design and implementation of these securities, and
stated,
"as far as the securities themselves are concerned,
there is little or nothing we would care to ask be changed."
It was this commenter's view, however, that the stripped
b The
comment letters are available to the public for
inspection and downloading on the Internet, at the address
provided earlier in this rule, and for inspection and copying at
the Treasury Department Library, Room 5030, Main Treasury
Building, 1500 Pennsylvania Avenue N.W., Washington, D.C. 20220.
See letters from Alexander A. Lothan, President, Apex
Investment Associates, Inc. (September 26, 1996); William Morris,
Reed Smith Shaw & McClay (September 27, 1996); Louis Crandall,
Wrightson Associates (October 21, 1996); L. Napoleon Cooper
(October 23 and November 12, 1996); Robert L. Elgin (October 25,
1996); Robert D. Sbarra, Chief Operating Officer-Fixed Income,
HSBC Securities, Inc. (October 25, 1996); Edwin F. Payne,
Chairman, PSA Government and Federal Agency Division, PSA The
Bond Market Trade Association (November 6, 1996).
8
securities as designed would not provide for a very liquid
market because of the lack of fungibility of the inflationindexed stripped components.
The commenter proposed and
described an inflation-indexed "strip that would be entirely
fungible with other inflation-protection strips."
Under the
commenter's proposal, the inflation-indexed securities would
be stripped into pieces of equal "real" value.
The
commenter indicated that its approach to creating fungible
STRIPS would require that Treasury relax its requirement
that STRIPS be sold in $1,000 increments.
Two of the remaining commenters confined their comments
to taxation issues.
One of these commenters expressed its
belief that inflation-indexed securities would be a great
success, but that the inflation adjustment to the principal
snould be treated as a capital gain or as taxable income at
either redemption or sale by the investor.
The other
cornmenter recommended that, before inflation-indexed
securities are offered to the public, Treasury should ask
Congress to provide statutory authority to exclude the
inflation adjustment from taxation.
The cornmenter said
that, without such an exclusion, taxable investors would
receive less than full inflation protection.
One cornmenter specifically addressed the subject of
reopenings of the security as stated in the proposed rule.
In its letter, the cornmenter stated its belief that it is
extremely important to reopen inflation-indexed securities
9
to consolidate issues, especially since stripped coupons
from different inflation-indexed securities will not be
interchangeable.
The commenter indicated that rules in the
tax code restrict reopenings of conventional bonds that
might otherwise be desirable, and stated that this may also
be true for inflation-indexed securities.
The commenter
offered two alternatives to resolve this "original-issuediscount" or "OlD" problem.
One alternative would be to
relax the OlD restrictions for inflation-indexed securities.
A second alternative would be to make an adjustment to the
current single-price auction procedures so that the coupon
rate would be rounded up instead of down.
As a result, the
initial price would always be at or above par, causing the
new security to be issued further above the OlD limit and
thus making it easier to reopen.
Another letter, submitted by an industry trade
association, had the following comments.
support
~or
While expressing
particular design details of the security (e.g.,
modelling the securities on Canada's Real Return Bonds,
selecting the CPI-U as the inflation index, adopting a
current auction technique and making the securities eligible
for stripping), the commenter stressed its concern and
belief "that there are a number of market practice,
regulatory, operational and technical issues which must be
resolved in order to foster a smooth and orderly auction and
efficient secondary market for the new securities in
10
January."
To this end,
"firms will have to make significant
changes to their internal trading, trade processing,
settlement, risk management, accounting, regulatory and tax
reporting systems, among others, leaving market participants
little time to build, test, and implement such internal
systems changes before trading in the new securities
commences in January."
The commenter indicated that it
previously advised Treasury that its members would need
approximately six months from publication of the final rules
to
p~epare
for trading, clearance and settlement of the new
securities.
The letter highlighted the commenter's specific
concerns, which included:
first issue;
(1)
the timing of the planned
(2) a preference to have more time to program
systems based on the final rules and more time to study the
Boskin Commission's Report
(methodology for calculating the
CPI which was released on December 4);
(3)
the lack of
fungibility of stripped interest components and its
potential affect or. liquidity, and the need to devise a
viable method to create fungible strips; and (4)
the need
for a market convention for the appropriate factor or
formula, preferably to be provided by Treasury, for valuing
stripped interest components.
The letter recommended that Treasury should:
(1) provide a monthly publication of reference CPI numbers
for at least the preceding three months as well as a monthly
11
publication of daily index ratios;
(2) maintain a permanent
and public record of all reference CPI numbers ever used to
provide for a single reference source i
(3)
clarify in the
final rules that, in the event of any discrepancies between
CPI numbers published by the Bureau of Labor Statistics of
the U.S. Departmen: of Labor and the Treasury, those
published by Treasury will take precedence;
(4) clarify in
the final rules the payment of the minimum guarantee;
add to the final
r~les
(5)
hypothetical examples and sample
calculations; and (6) with other regulators, provide formal
guidance as to how the securities are required to be valued,
recorded and repor:ed under different regulatory regimes.
III.
Changes from the Proposed Rule
A.
Genera2.
After takins into consideration the comments received,
the Department is adopcinS as a final rule this amendment to
the uniform offerins circular setting out the terms,
conditions and fea:ures of Treasury inflation-indexed
securities.
The final rule adopts the proposed rule without
significant changes.
A summary of the main features of the
final rule that remair- unchanged from the proposed rule are:
(1) the inflation-indexed securities will be structured
similarly to the Real Return Bonds issued by the Government
of Canada;
(2)
the interest rate, which is set at auction,
will remain fixed throughout the life of the security while
12
the principal amount of the security will be adjusted for
inflation, and interest payments will be based on the
inflation-adjusted principal at the time the interest is
paid;
(3)
the non-seasonally adjusted CPI-U will be the
inflation index;
(4;
the auction process will use a single-
price auction method that is the same as that currently used
for two-year and five-year Treasury notes; and (5)
inflation-indexed securities will be eligible immediately
for stripping into their principal and interest components.
The proposed chanqes in §§ 356.2; 356.3; 356.5; 356.10;
356.12; 356.13; 356.20; 356.32; Appendix B, Section I,
Paragraphs A and C; Appendix B, Section II; Appendices C and
D; and Exhibit A, Section IV are being adopted as originally
proposed.
Readers should refer to the preamble of the
proposed rules for a
descrip~ion
of the above provisions
being adopted in this final rule.
B. Section 356.17
Resoonsibility for oayment
The proposed rule,
lD
contained minor
confo~.ing
paragraphs 356.17(a) and (b),
clarifications to reflect that
bidders submitting payment with their tender may have to
include, in addition tc announced accrued interest, an
inflation-adjustment
in paragraphs
~~ount
with their payment.
The wording
(a) an8 (b) has been modified from the
proposed rule to re:lect a recent amendment to the offering
circular, which added payment by authorized electronic means
8
See supra note 3.
13
as a payment option. 9
C. Section 356.25
Payment for awarded securities
In the proposed rule, a conforming change was made to
paragraph 356.25 (a) (2)
to state that additional amounts due
at settlement may include inflation adjustments.
The
proposed rule also added a new paragraph (c) to provide that
the payment amount for awarded securities will be the
settlement amount, as that term is defined in § 356.2.
The
substance of these two provisions remains unchanged in the
final rule.
However, in the final rule, new paragraph (c)
has been redesignated as paragraph (d) to reflect a recent
amendment to the unifor.m offering circular authorizing
payment by electronic means,
10
which was effective after
publication of the proposed rule.
D. Section 356.30
Payment of prillcipal and interest on
notes and bonds
Proposed paragraph 356.30(b) has been modified in
accordance
wi~h
one
co~menter's
suggestion that the
Department make clear in this section its obligation to pay
at maturity the greater of the inflation-adjusted principal
amount or par
amou~:.
E. Section 356.31
STRIPS
No substantive changes have been made in this section
from the proposed rule, which permits inflation-indexed
Q
10
61 FR 54908
Id.
(October 22, 1996).
14
securities to be stripped into separate principal and
interest components.
Unlike the conventional STRIPS program
in which interest components having the same
payment/maturity date are fungible
CUSIP number),
(i.e., have the same
interest components stripped from different
inflation-indexed securities will not be fungible even if
they have the same payment/maturity date.
Some commenters have maintained that the creation of
fungible stripped interest components is essential to
provide sufficient liquidity in the market for these
components.
One commenter provided an alternative method
that would achieve fungibility for inflation-indexed
interest components.
commenter.
This method was supported by a second
The Department understands these concerns and
strongly supports the development of an active, liquid
market for inflation-indexed securities, including their
stripped components.
Making the securities attractive to a
broad investor base and ensuring the development of a liquid
market have been two of Treasury's primary objectives
throughout the securities' design and development.
The
Department is evaluating alternative methodologies,
including
~he
recommendation mentioned above, for creating
fungible stripped interest components from inflation-indexed
securities.
However, we are not yet in a position to adopt
a methodology that would permit fungibility.
We have
decided to proceed with the STRIPS program as described in
15
the proposed rule and will continue to work on making
interest components fungible in a manner that is
operationally feasible.
We believe that this approach is
preferable to not having the securities strippable at the
time they are first offered.
F. Section 356.32
Taxation
No change has been made to this section from the
proposed rule.
However, readers should note that they are
directed in paragraph (b) to the relevant Internal Revenue
Service (IRS) regulations for further information about the
tax treatment, and reporting, of inflation-indexed
securities.
The IRS rules are expected to be publicly
available and published in the Federal Register at the same
time as this final rule is published, or shortly thereafter.
The IRS regulations will be issued under
§§
1275(d) and 1286
of the Internal Revenue Code.
In the meantime, prospective investors aye advised to
refer to IRS Notice 96-51 published in the Internal Revenue
Bulletin 1996-42
(October 15, 1996) for information
regarding taxation of inflation-indexed securities and the
stripped components of such securities.
Additionally, in
September, Treasury issued a statement providing an
explanation of the federal income tax treatment for these
securities and their stripped components.
Readers
interested in receiving a copy of this statement should call
the Department's Office of Public Affairs automated
16
facsimile system at 202-622-2040 and request Document No.
1290.
The Department also wishes to respond to the concern
expressed by one of the commenters regarding rules in the
tax code that could limit Treasury's ability to reopen
issues of inflation-indexed securities.
We note that the
IRS regulations will permit reopenings of inflation-indexed
securities without regard to the OlD rules, provided that
the reopenings occur not more than one year after the
original securities were first issued to the public.
G. Aopendix B, Section I, Paragraph B
In the proposed rule, Treasury stated that it did not
intend to publish the index ratio for use by market
participants.
However, in the preamble, the Department
specifically asked for comments on whether a monthly
publication of the daily index ratios or reference CPls
would be useful to market participants.
co~~enters
One of che
strongly urged that Treasury publish both the
reference CPI numbers for at least the three preceding
months and the daily index ratios on a month-to-month basis.
Treasury will support this request.
Although Appendix B has
been revised by deleting the language from the proposed rule
and is now silent with respect to publication of the daily
index ratios, Treasury intends to provide monthly the daily
reference CPI numbers and the daily index ratios on a pilot
basis for one year.
This information will be available
17
through such means as a monthly press release, the Internet,
and automated facsimile systems.
After a year, the Department will determine whether
there is still a need for this information to be provided by
Treasury.
It is our understanding that most market
participants will incorporate the formulas for calculating
the reference CPIs and index ratios into their trading or
other automated systems.
Additionally, it is reasonable to
expect that the major electronic financial service providers
(e.g., Bloomberg, Telerate, Reuters) will provide this
information, or substantially similar information, to their
subscribers.
F~rther,
Treasury will maintain an archival
record of the referer.ce CPIs and the daily index ratios
throughout the life
0:
each inflation-indexed security.
This informatior- will be readily available to market
participants.
In addition to the publication of reference CPIs and
index ratios, the
Treas~ry
will provide monthly the non-
seasonally adjusted CP: for each of the prior three months.
Changes have beer. made to the paragraph that addresses
index contingencies.
Language has been revised to clarify
Treasury's course of action if the CPI is:
discontinued, or
in the judgment of the Secretary, either fundamentally
altered in a manner materially adverse to the interests of
an investor in the security or altered by legislation or
Executive Order in a manner materially adverse to the
18
interests of an investor in the security.
A change to the CPI would be considered fundamental if
it affected the character of the CPl.
Technical changes
made by the Bureau of Labor Statistics (BLS) to the CPI to
improve its accuracy as a measure of the cost of living
would no: be consideyed fundamental changes.
Technical
changes include, bu: are not limited to, changes in:
(1)
the specific items
to be
(e.g., apples or major appliances)
priced for the index;
(2) the way individual price
quotations are aggregated to construct component price
indices for these items (aggregation of item sub-strata) ;
(3)
the method foy
c~~bining
these component price indices
to obtain the comprehensive, all-items CPI (aggregation of
item straca); and (4)
the pyocedures for incorporating new
goods inco the index and making adjustments for quality
changes in
ex~sting
goods.
Technical changes to the CPI previously made or
announced by ELS
in~l~de
select the precise
i:e~s
introducing probability sampling to
foy which prices are collected and
the stores in which co:lection takes place, and changing the
way in which price movements of major components, such as
shelter costs foy homeowners in the early 1980s and medical
care costs beginning in 1997, are measured.
The Advisory Corrmission to Study the Consumer Price
Index (the Boskin Commission) made a number of
recommendations to improve the calculation of changes in the
19
cost of living.
Some of these recommendations were directed
to BLS and were designed to improve the calculation of the
monthly CPI.
These recommendations, if and to the extent
implemented by BLS, would constitute technical changes
rather than
fundamen~al
changes.
The Boskin Commission also recommended cODstruction ot
an annual measure of the cost of living as a supplement to
the monthly CPl.
Development and use ot such a supplement,
by itself, would not change the monthly CPI itself.
While
the Boskin Commission did not suggest that such a measure
replace the CPI, a decision by B1$ to replace, rather than
supplement, the current monthly
cpr
with
an
annual measure
of cODsumer prices, would constitute a fundamental change.
In addition, if the secretary determines that the
cpr
is altered by legislation or Executive Order ina manner
that is materially adverse to the interests of an investor
in the security, the Secretary would propose an alternative
index.
A minor, technical change has also been made to clarify
Treasury's intention in the situation where the CPI for a
particular month is not reported by the last day of the
following month.
In such a situation, the last CPI that has
been reported (including any revision of a previously
reported CPI number) will be used to calculate
cpr
number~
tor months for which the CPI has Dot been reported by such
day.
20
H. Appendix B, Section III
Minor, technical changes have been made to certain
formulas and examples by adding a definition of one
variable, and by elaborating on the definitions of two other
variables.
I. Other Issues
One commenter raised a number of issues pertaining to
the regulatory treatment of inflation-indexed securities,
which are outside the scope of the uniform offering circular
regulations.
Specifically, the commenter questioned how
these securities are to be valued, recorded and reported
under various regulatory regimes for purposes such as large
position reporting, determining regulatory capital and
margin amour-ts, and broker-dealer reporting.
The Treasury
has givec informal, general guidance on some of these issues
as they pertain to the Government Securities Act (GSA)
regulations, 17 CFR Chapter IV,
reporting,
cap~ta~
(e.g., large position
and haircut treatment, recordkeeping and
financial reporting),
a~d
questions as they arise.
will respond to additional
The Treasury is also considering
issuing an interpretation of the GSA regulations to provide
formal clarification and guidance on regulatory issues
within the scope of its authority.
Additionally, Treasury
has been coordinating and consulting with other regulators,
such as staff of the Securities and Exchange Commission, the
Board of Governors of the Federal Reserve System, and the
21
Federal Reserve Bank
~f
New York, to address the various
regulatory issues raised by the commenter and to foster
consistent regulatory treatment where possible and
appropriate.
The commenter also raised concerns that a number of
questions remain unanswered regarding market practice,
trading, accounting and operational issues related to the
new securities.
While these issues are also outside the
scope of both the uniform offering circular rules and
Treasury's authority under the GSA, Treasury appreciates the
need for consistent and widely accepted trading practices
and industry conventions for quoting, pricing, and valuing
inflation-indexed securities.
Treasury strongly supports
and encourages industry efforts, including the formation of
the PSA Inflation Bond Trading Practices Task Force, to
develop trading and market practice conventions.
We are
confident the industry will be successful in this effort and
we will continue to provide guidance as needed.
IV.
Procedural Requirements
This final rule does not meet the criteria for a
~significant
regulatory action" pursuant to Executive Order
12866.
Although this rule was issued in proposed form to
secure the benefit of public comment, the notice and public
comment procedures requirements of the Administrative
22
Procedure Act are inapplicable, pursuant to 5 U.S.C.
553 (a) (2) .
As no notice of proposed rulemaking was required, the
provisions of the Regulatory Flexibility Act
(5 U.S.C. 601,
et sea.) do not apply.
There is no new collection of information contained in
this 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 section 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
co~lection
of information unless it displays a valid OMB
control number.
List of Subjects in 31 CFR Part 356
Bonds, Federal
Rese~e
System, Government securities,
Securities.
DATED:
Signed:
Donald V. Hammond
Deputy Fiscal Assistant Secretary
23
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. 2-93)
1.
The authority
citatio~
for part 356 continues to read as
follows:
Authority:
5 C.S.C. 301; 31 U.S.C. 3102, et seq.; 12
U.S.C. 391.
2.
Sec~ion
356.2 is amended by revising the definitions of
"Accrued interest.," "Book-entry security," "Customer,"
"Inte:::-est race,"
"M-...:.ltiple-price auction," "Par amount, "
"Settlement amount,"
"STRIPS," and "Yield;" and adding in
alphab-::ical orde:- t!1e definitions of "Business day,"
"Consume:::- Price
"Index ratio,"
I~dex,"
"Daily interest decimal," "Index,"
"Ir.:la:ion-adjusted principal," "Real yield,"
and "Reference CPI" to read as follows:
~
356.2
Definitions.
***
Accrued int.e:-os: means an amount payable to the
Department. for such part of the next semiannual interest
payment that represents interest income attributed to the
24
period prior to the date of issue.
(See Appendix B, Section
I, Paragraph C.)
*****
Book-entry
secu~ity
means a security the issuance and
maintenance of which are represented by an accounting entry
or electronic
book-entry
and not by a certificate.
reco~d
secu~ities
Treasury
may generally be held in either TRADES
or in TREASURY DIRECT.
(See
§
356.3.)
Business dav means any day other than a Saturday,
Sunday, or
othe~
day on which the Federal Reserve Banks are
not open for business.
*****
Consume~
P~ice
Index (CPI) means the monthly non-
seasonally adjusted u.s. Citv Averaoe All Items Consumer
P~ice
Index fo~ All U~ban Consumers, published by the Bureau
of Labor Statistics of the Department of Labor.
Appendix
(See
~.)
*****
Customer means a
bidde~
on whose behalf a depository
institution or deale~ has been directed to submit or forward
a competitive
o~
noncompetitive bid for a specified amount
of securities in a specific auction.
institutions and
customers,
deale~s
whethe~
Only depository
may submit or forward bids for
di~ectly
to a Federal Reserve Bank or the
Bureau of the Public Debt, or through an intermediary
depository institution or dealer.
25
Daily interest decimal means, for a fixed-principal
security, the interest factor attributable to one day of an
interest payment period per $1,000 par amount.
*****
Index means the Consumer Price Index, which is used as
the basis for making adjustments to principal amounts of
inflation-indexed securities.
Index ratio means,
(See Appendix D.)
for any particular date and any
particular inflation-indexed security, the Reference CPI
applicable to such date divided by the Reference CPI
applicable to the original issue date (or dated date, when
the dated date is different from the original issue date) .
(See Appendix B, Sectior. I, Paragraph B.)
Inflation-adjusted
indexed
secu~ity,
D~inciDal
means, for an inflation-
the value of the security derived by
multiplying the par amount by the applicable index ratio as
described in
Append~x
B, Section I, Paragraph B.
Interest rate means the annual percentage rate of
inte~est
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.)
*****
Multiple-price auction means an auction in which each
successful competitive bidder pays the price equivalent to
the yield or rate that it bid.
26
*****
Par amount means the stated value of a security at
original issuance.
*****
Real yield means,
for an inflation-indexed security,
the yield based on the payment stream in constant dollars,
i.e., before adjustment by the index ratio.
Reference CPI
(Ref CPI) means, for an inflation-indexed
security, the index number applicable to a given date.
(See
Appendix B, Section I, Paragraph B.)
*****
Settlement amount means the par amount of securities
awarded less any discount amount and plus any premium amount
and/or any accrued interest.
For inflation-indexed
securities, the settlement amount also includes any
inflation adjustment when such securities are reopened or
when the dated date is Jifferent from the issue date.
*****
STRIPS (Separate Trading of Registered Interest and
Principal of Securities) means the Department's program
under which eligible securities are authorized to be
separated into principal and interest components, and
transferred separately.
These components are maintained in
book-entry accounts, and transferred, in TRADES.
*****
Yield, also referred to as "yield to maturity,
II
means
27
the annualized rate of return to maturity on a fixedprincipal security expressed as a percentage.
For an
inflation-indexed security, yield means the real yield.
(See Appendix B.)
3.
Section 356.3 is amended by revising the introductory
paragraph and the heading of paragraph (a) and removing
footnote 1; adding three sentences at the end of paragraph
(a); and adding a second sentence at the end of paragraph
(b), to read as follows:
§
356.3
Book-entrv securities and systems.
Securities issued subject to this Part shall be held
and transferred in either of the two book-entry securities
systems -- TRADES or TREASURY DIRECT
section.
described in this
Securities are maintained and transferred, to the
extent authorized in 31 CFR 357,
~n
these two book-entry
systems at theiy par amount, e.g., for inflation-indexed
securities, adjustments for inflation will not be included
in this amount.
Securities may be transferred from one
system to the other in accordance with Treasury regulations
governing book-entry Treasury bills, notes, and bonds.
See
Department of the Treasury Circular, Public Debt Series No.
2-86, as amended (31 CFR Part 357).
(a)
(TRADES)
Treasury/Reserve Automated Debt Entry System
*** For accounts maintained in TRADES, Treasury
28
discharges its payment obligations when payment is credited
to the applicable account maintained at a Federal Reserve
Bank or payment is made in accordance with the instructions
of the person or entity maintaining such account.
Further,
neither Treasury nor the Federal Reserve Banks have any
obligations to, nor will they recognize any claims of, any
person or entity that does not have an account at a Federal
Reserve Bank.
In addition, neither Treasury nor the Federal
Reserve Banks will recognize the claims of any person or
entity with respect to any accounts not maintained at a
Federal Reserve Bank.
(b)
*** In TREASURY DIRECT, Treasury discharges its
payment obligations when payment is made to a depository
institution for credit to the account specified by the owner
of the security, or when payment is made in accordance with
che instructions of the owner of the security.
*****
4.
Section 356.5 is amended by revising the introductory
text and paragraphs
G 356.5
(b) and (c) to read as follows:
Description of securities.
Securities offered pursuant to this Part are offered
exclusively in book-entry form and are direct obligations of
the United States, issued under Chapter 31 of Title 31 of
the United States Code.
The securities are subject to the
29
terms and conditions set forth in this Part, including the
appendices, as well as the regulations governing book-entry
Treasury bills, notes, and bonds
(31 CFR Part 357), and the
offering announcements, all to the extent applicable.
When
the Department issues additional securicies with the same
CUSIP number as outscanding securities, all securities with
the same CUSIP number are considered the same security.
*****
(b) Treasurv notes.
(1)
Treasurv fixed-DrinciDal J notes.
Treasury fixed-
principal notes are issued with a stated rate of interest to
be applied to
t~e
par amount, have interest payable
semiannually, and are redeemed at their par amount at
maturity.
They are sold a: discount, par, or premium,
depending upon the auction results.
They have matulities of
a: least one year, bu: no: more than ten years.
(2) Treasury
i~:la:ior.-indexed
notes.
Tr~asury
inflation-indexed notes are issued with a stated rate of
interest to be applied to the inflation-adjusced principal
on each interest
payme~c
dace, have interest payable
semiannually, and are redeemed at maturity at their
i~:lation-adjusted
principal, or ac their par amount,
J
The term "fixed-principal" is used in this Part to
distinguish such securities from "inflation-indexed" securities.
Fixed-principal notes and fixed-principal bonds are referred to
as "notes" and "bonds" in official Treasury publications, such as
offering announcements and auction results press releases, as
well as in auction systems.
30
whichever is greater.
They are sold at discount, par, or
premium, depending upon the auction results.
They have
maturities of at least one year, but not more than ten
years.
(See Appendix B for price and interest payment
calculations and Appendix C for Investment Considerations.)
(c) Treasurv bonds.
(1)
Treasury fixed-
Treasurv fixed-DrinciDal bonds.
principal bonds are issued with a stated rate of interest to
be applied to the par amount, have interest payable
semiannually, and
maturity.
ar~
redeemed at their par amount at
They are sold at discount, par, or premium,
depending upon the auction results.
maturities of more
tha~
te~
They typically have
years.
(2) Treasurv inflation-indexed bonds.
Treasury
inflation-indexed bonds are issued with a stated rate or
interest to be applied to the inflation-adjusted principal
on each interest payment date, have interest payatle
semiannually, and are
redee~ed
at maturity at their
inflation-adjustec pr:n=ipa:, or at their par amount,
whichever is greater.
They are sold at discount, par, or
premium, depending upon the auction results.
have maturities of more than ten years.
They typically
(See Appendix B for
price and interest payment calculations and Appendix C for
Investment Considerations.)
5.
Section 356.10 is amended by adding a sentence at the
31
end of the paragraph, before the parenthetical last
sentence, to read as follows:
§
356.10
***
Offerina announcement.
Accordingly, bidders should read the applicable offering
announcement in conjunction with this Part. ***
6.
Section 356.12 is amended by revising the first sentence
of paragraph (a); revising paragraphs (b) (2),
(ii);
(c) (1) (i) and
and adding new paragraph (c) (1) (iii) to read as
follows:
~
356.12
NoncomDetirive and competitive bidding.
(a) General.
All bids, including bids for reopenings,
0:
must state the par amount
securities bid for and must
equal or exceed the minimum bid amount stated in the
o:fering announcement. ...**
(b)
***
(2) Additional restrictions.
A bidder may not bid
noncompetitively for its own account if, in the security
being auctioned, it holds or has held a position in whenissued trading or in futures or forward contracts at any
time between the date
0:
the offering announcement and the
designated closing time for the receipt of competitive
tenders. ***
(c)
***
32
(1)
***
(i) Treasury bills.
A competitive bid must show the
discount rate bid, expressed with two decimals, e.g., 3.10.
Fractions may not be used.
(ii) Treasury fixed-principal securities.
A
competitive bid must show the yield bid, expressed with
three decimals, e.g., 4.170.
Fractions may not be used.
(iii) Treasury inflation-indexed securities.
A
competitive bid must show the real yield bid, expressed with
three decimals, e.g., 3.070.
Fractions may not be used.
*****
7.
Section 356.13 is amended by revising paragraph (a) to
read as follows:
§
356.13
Net lonG position.
(a) ReportinG net lonG positions.
When bidding
competitively, a bidder must report the amount of its net
long position
w~en
the total of all of its bids in an
auction plus the bidder's net long position in the security
being auctioned equals or exceeds the net long position
reporting threshold amount.
The threshold amount for any
particular security will be as stated in the offering
announcement for that security.
(See
§
356.10.)
That
amount will be $2 billion for bills, notes, and bonds unless
otherwise stated in the offering announcement.
For example,
33
the net long position reporting threshold amount may be less
than $2 billion for smaller security offerings, e.g.,
certain inflation-indexed securities or cash management
bills.
If the bidder either has no position or has a net
short position and the total of all of its bids equals or
exceeds the threshold amount, e.g., $2 billion, a net long
position of zero must be reported. ***
*****
Section 356.17 is amended by revising the last sentence
8.
In the introductory paragraph and the introductory text of
paragraphs
~
(a) and
(b)
to read as follows:
for payment.
ResDo~s~b:l::v
356.17
*** The spec:::=
deDend or.
~e~u~~ements,
whe:he~
awa~jec
be
inte~es:
submitte~
bee~
made,
a~j/o~
w::~
suc~
a5
p~ov~din9
fo~
:~e
funds
a=cou~:.
(b)
TR..A:)ES.
:~~
the par amount and announced
lnflation adjustment, if any, must
:ende~
pa~~e~:
~!T'_r:1e:::a:.ely
c:
a
Fo~
will be delivered in
For securities to be held in
0:
':'REASURY DIRE:-:-, pay:ne:-::
accrued
secu~ities
TR~ASURY~!REC~.
(a)
outlined in this section,
u~less
other provisions have
ty an authorized electronic means
available funds or by charge to
depos~tory
institution.
securities to be held in TRADES,
34
payment of the par amount and announced accrued interest
and/or inflation adjustment, if any, must be submitted with
the tender unless other provisions have been made, such as
payment by an authorized electronic means providing for
immediately available funds or by charge to the funds
account of a depository institution.
*****
9.
Section 356.20 is amended by revising the introductory
text of paragraph (c) and adding a sentence to the end of
paragraph (c) (2)
§
356.20
to read as follows:
Determination of auction awards.
*****
pu~chase
(c) Determinina
prices for awarded securities.
Price calculations will be rounded to three decimal places
on the basis of
p~ice
pe::- hundred, e.g., 99.954.
(See
Appendix B.)
*****
(2)
***
For inflation-indexed securities, the price of
such securities will be the price equivalent to the highest
real yield at which bids were accepted.
10.
Section 356.25 is amended by revising the last sentence
in paragraph (a) (2)
follows:
I
and adding paragraph (d) to read as
35
§
356.25
Payment for awarded securities.
*****
(a)
***
(2 )
*** Such additional amount may be due if the
auction calculations result in a premium or if accrued
interest and/or inflation adjustment is due.
*****
(d) Amount of oayment for awarded securities.
The
payment amount for awarded securities will be the settlement
amount as defined in
11.
§
356.2.
(See formulas in Appendix B.)
Section 356.30 is amended by redesignating the text of
the current
sectio~
and revising the
as
las~
(a), adding a heading of "General"
sentence in newly redesignated
paragyaph (a), and adding payagraph (b) to read as follows:
€i
356.30
Payrnen: of oYincioal and interest on notes and
bonds.
(a) General. **y In the event any principal or interest
payment date is not a business day, the amount is payable
(without additional inteyest)" on the next business day.
(b) Treasuyv inflation-indexed securities.
At
maturity, the inflation-adjusted principal will be paid,
unless the inflation-adjusted prinCipal is less than the par
amount of the secuyity, in which case an additional amount
will be paid at maturity so that the additional amount plus
36
the inflation-adjusted principal equals the par amount.
If
a security has been stripped, any such additional amount
will be paid at maturity to holders of principal components
only.
Regardless of whether or not an additional amount is
paid, the final interest payment will be based on the
inflation-adjusted principal at maturity.
12.
Section 356.31 is amended by revising paragraph (a) and
the first sentence
0:
paragraph (b), redesignating
paragraphs (c) and (d) as paragraphs
(g) and (h)
respectively, adding new paragraphs (c) through (f), adding
a third and fourth sentence to newly redesignated paragraph
(g) and revising newly redesignated paragraph (h) to read as
follows:
~
356.31
STRIPS.
(a) General.
offering
A note or bond may be designated in the
announceme~:
At the optior.
its issue date
0:
as eligible for the STRIPS program.
the r.older, apd generally at any time from
un:~:
its call or maturity, any such security
may be "stripped, " i. e. , divided into separate principal and
interest components.
and all interest
A short or long first interest payment
pa}~ents
within a callable period are not
eligible to be stripped from the principal component.
CUSIP numbers and payment dates for the principal and
interest components are provided in the offering
The
37
announcement if not previously announced.
(b) Minimum par amounts required for STRIPS.
For a
note or bond to be stripped into the components described
above,
the par amount of the note or bond must be in an
amount that, based on its interest rate, would produce a
semiannual interest payment, before adjustment for
inflation, in a multiple of $1,000. ***
(c) Principal comoonents stripped from fixed-principal
securities.
Principal components stripped from fixed-
principal securities are maintained in accounts, and
transferred, in TRADES at their par amount.
The principal
components have a CUS=P number that is different from the
CUSIP number
(d)
0:
the fully-constituted (unstripped) security.
Interest components striooed from fixed-principal
securities.
Interest components stripped from fixed-
principal securities are maintained in accounts, and
transferred,
in TRADES at their original payment value,
which is derived by applying the semiannual interest rate to
the par amount.
When an interest component is created, the
interest payment date becomes the maturity date for the
component.
All sucr. components with the same maturity date
have the same CUSIP number, regardless of· the underlying
security from which the interest payments were stripped.
All interest components have CUSIP numbers that are
different from the CUSIP number of any fully-constituted
security and any principal component.
38
(e) Principal components stripped from inflationindexed securities.
Principal components stripped from
inflation-indexed securities are maintained in accounts, and
transferred, in TRADES at their par amount.
At maturity,
the holder will receive the inflation-adjusted principal
value or the par amount, whichever is greater.
356.30.)
(See §
Principal components have a CUSIP number that is
different from the CUSIP number of the fully-constituted
security.
(f) Interest components stripped from inflation-indexed
securities.
Interest components stripped from inflation-
indexed securities are maintained in accounts, and
transferred, in TRADES at their original payment value,
which is derived by applying the semiannual interest rate to
the par amount.
When an interest component is created, the
interest payment date becomes the maturity date for the
component.
.that is
Each such component has a unique CUSIP number
d~fferent
from the CUSIP number of any interest
components stripped from different securities, even if the
components have the same maturity date.
All interest
components have CUSIP numbers that are different from the
CUSIP number of any fully-constituted security and any
principal component.
w~ll
At maturity, the payment to the holder
be derived by applying the semiannual interest rate to
the inflation-adjusted principal of the underlying security.
(g) Reconstituting a security. *** Interest components
39
stripped from inflation-indexed securities are different
from interest components stripped from fixed-principal
securities and, accordingly, are not interchangeable for
reconstitution purposes.
Interest components stripped from
one inflation-indexed security are not interchangeable for
reconstitution purposes with interest components stripped
from another inflation-indexed security.
(h) Applicable regulations.
Unless otherwise provided
in this Part, notes and bonds stripped into their STRIPS
components are governed by Subparts A, Band D of Part 357
of this title.
13.
§
Seccion 356.32 is revised to read as follows:
356.32
Taxatlon.
(a) General.
Securities issued under this Part are
subjecc tc all applicable taxes imposed under the Internal
Revenue Code of 1986, or 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-indexed securities.
Special
federal income tax rules for inflation-indexed securities,
and principal and interest components stripped from such
securities, are set forth in Internal Revenue Service
40
regulations.
14.
Appendix B to Part 356 is amended by revising the list
of section titles, and adding two new paragraphs following
the list to read as follows:
APPENDIX B TO PART 356--FORMULAS AND TABLES
I. Computation of Interest on Treasury Bonds and Notes.
II. Formulas for Conversion of Fixed-Principal Security
Yields to Equivalent Prices.
III. Formulas for Conversion of Inflation-Indexed
Security Yields to Equivalent Prices.
IV. Computation .of Purchase Price, Discount Rate, and
Investment Rate (Coupon-Equivalent Yield)
for Treasury
B~lls.
The numbers in this appendix are examples given for
illustrative purposes only and are in no way a prediction of
interest rates on any bills, notes, or bonds issued under
this Part.
In some of the following examples, intermediate
rounding is used to allow the reader to follow the
calculations.
In actual practice, the Department generally
does not round prior to determining the final result.
41
15.
Appendix B, Section I is amended as follows:
by
redesignating paragraphs A through D and their corresponding
Examples as paragraphs A.1. through A.4. respectively, and
adding a new title for paragraph A, revising newly
redesignated paragraph A.1., revising the first sentence in
newly redesignated paragraphs A.2., A.3. and its Example,
and A.4. and its Example; by adding a new paragraph B; and
by redesignating paragraph E as paragraph C, revising the
second paragraph, adding a third paragraph prior to the
Examples in newly redesignated paragraph C., redesignating
the headings for Examples C. (1) and (2) as C. (1) (i) and
C. (1) (ii)
respeccively, and adding a new heading for Example
C. (1) .
I. COMPUTATION OF INTEREST ON TREASURY BONDS AND NOTES
A. Treasurv Fixed-Princioal Securities
;
Regular naIf-Year
Payme~t
Period
Interest on marketable fixed-principal securities is
payable on a
semia~~ua:
basis.
The regular interest payment
period is a full hal:-year of six calendar months.
of half-year periods are:
Examples
(1) February 15 to August 15,
(2) May 31 to November 30, and (3) February 29 to August 31
(in a leap year).
:ixed-principal
Calculation of an interest payment for a
sec~rity
with a par amount of $1,000 and an
interest· rate of 8% is made in this manner:
($1,000 x .08)/2 = $40.
Specifically, a semiannual interest
42
payment represents one-half of one year's interest, and is
computed on this basis regardless of the actual number of
days in the half-year.
2.
Daily Interest Decimal
In cases where an interest payment period for a fixed-
principal security is shorter or longer than six months or
where accrued interest is payable by an investor, a daily
interest decimal, based on the actual number of days in the
half-year or
half-yea~s
involved, must be computed. ***
*****
3.
Short First Payment
In cases where the
fixed-principal
pe~iod
secu~ity
Pe~iod
fi~st
interest payment period for a
covers less than a full half-year
(a "short coupon"), the daily interest decimal is
multiplied by the number of days
~rom,
but not including,
the issue date to, and including, the first interest payment
date, resultins in the amount of the interest payable per
$1,000 par amount. ***
EXAMPLE.
A 2-year :ixed-principal note paying 8-3/8%
interest was issued on Culy 2, 1990, with the first interest
payment on December 31, 1990. ***
4.
Long First Payment Period
In cases where the first interest payment period for a
43
fixed-principal security covers more than a full half-year
period (a "long coupon"), the daily interest decimal is
multiplied 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. ***
EXAMPLE.
AS-year 2-month fixed-principal note paying
7-7/8% interest was issued on December 3, 1990, with the
first interest payment due on August 15, 1991. ***
B.
1.
Treasu~y
Inflation-Indexed Securities
Indexing Process
Interest on marketable Treasury inflation-indexed
securities is payable on a semiannual basis.
indexed
secu~ities
a~e
The inflation-
issued with a stated rate of interest
which remains constant for the term of the particular
security.
Interest payments are based on the security'S
inflation-adjusted
p~incipal
at the time interest is paid.
This adjustment is made by multiplying the par amount of the
security by the
2.
app~icable
Index Ratio.
Index Ratio
The numerator of the Index Ratio, the Ref
CPI~~,
is the
index number applicable for a specific day, and the
denominator of the Index Ratio is the Ref CPI applicable for
the original issue date.
However, when the dated date is
44
different from the original issue date, the denominator is
the Ref CPI applicable for the dated date.
The formula for
calculating the Index Ratio is:
Index Rat.io o:llC
CPID~II:
Ref CPIlssuc D~II:
= valuation date
Where Date
3.
Ref
=
Reference CPI
The Ref CPI for the first day of any calendar month is
the CPI for the third preceding calendar month.
CP~
example, the Re:
the CPI for
Janua~y.
CPI for any
othe~
i~:e~polatior.
day
0:
the
Ja~~a~y;
and
nex: month
which is reported in February.
0:
day
i~
~hE
(i~
i~~e~pola:ior..
the Index
applicable to April 1 in any year is
be:wee~
mor.:~
Ra:~G
de=ima! places
The Ref
a month is determined by a linear
t~e
w~ich
Re: cpr applicable to the first
suer. day falls
(in the example,
Re: C?: app:icable to the first day of the
the
exa~plE.
fo~
a~~
expressed to f iv,=
For purposes of
Feb~uary).
ca:=~:a::onE
witt regard to the Ref CPI and
a spe=::ic date will be truncated to six
~o~nje~
the Re: cpr anc thE
Re:
For
:~=ex
de~
CP:~I
to five decimal places such that
Ratlo
fo~
.!.:T".a:' places.
:
-
+
D
1
that date will be
The formula for the Ref
[Ref CPI M +
I
-
Ref CPI M )
4S
Where Date = valuation date
D
the number of days in the month in which Date falls
t
the calendar day corresponding to Date
CPI M = CPI reported for the calendar month M by the Bureau
of Labor Statistics
Ref CPI M
=
Ref CPI for the first day of the calendar month
in which Date falls, e. g., Ref CPIApril1 is the
CPI Janul "
Ref CPI M + 1 = Ref CPI for the first day of the calendar month
immediately following Date
For example, the Ref CPI for April 15, 1996 is
calculated as follows:
Ref CPI Apnl 15. 1996
14
30
[Ref
where D
30,
=
Ref CPIApril1. 1996
CPI~b~
t
I.
+
1990 - Ref CPIAPril1. }996 J
= 15
154.40, the non-seasonally adjusted
CPI-U for January 1996.
Ref
CPIl>b~
I.
1996
154.90, the non-seasonally adjusted
CPI-U for February 1996.
Putting these values in the equation above:
46
Ref CPIAprill5.1996
154.40 + 14
30
[154.90 - 154.40J
Ref CPIAPrillS.1996 = 154.633333333
This value truncated to six decimals is 154.633333;
rounded to five decimals it is 154.63333.
To calculate the Index Ratio for April 16, 1996, for an
inflation-indexed security issued on April 15, 1996, the Ref
CPIApn116.1996 must first be calculated.
Using the same values
in the equation above except that t=16, the Ref CPIAPri116.1996
is 154.65000.
The Index Ratio for April 16, 1996 is:
Index RatioApnl16. 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
If a previously reported CPI is revised, Treasury will
continue to use the previously reported CPI in calculating
the principal value and interest payments.
If the CPI is rebased to a different year, Treasury
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.
If, while an inflation-indexed security is outstanding,
the applicable CPI is:
(1) discontinued,
(2)
in the
47
judgment of the Secretary, fundamentally altered in a manner
materially adverse to the interests of an investor in the
security, or (3)
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,
Treasury, after consulting with the Bureau of Labor
Statistics, or any successor agency, will substitute an
appropriate alternative index.
Treasury will then notify
the public of the substitute index and how it will be
applied.
Determinations of the Secretary in this regard
w:'ll be final.
If the CPI
fo~
a particular month is not reported by
the last day of the following month, the Treasury will
announce an index
nur.be~
based on the last twelve-month
change in the CPI available.
Any calculations of the
Treasury's payment obligations on the inflation-indexed
secu~ity
index
that rely on that month's CPI will be based on the
numbe~
that the
T~easury
has announced.
For example,
if the CPI for month M is not reported timely, the formula
for calculating the index number to be used is:
;
CPI~I
CPI~I
I
X
I
IT:
Generalizing for the last reported CPI issued N months
prior to month M:
48
CPI M _N
X
r
l
CPI M _N
]
1:!
12
CPI M_N_1:!
If it is necessary to use these formulas to calculate
an index number,
it will be used for all subsequent
calculations that rely on that month's index number and will
not be replaced by the actual CPI when it is reported,
except for use in the above formulas.
When it becomes
necessary to use the above formulas to derive an index
number, the last CPI that has been reported will be used to
calculate CPI
numbe~s
for months for which the CPI has not
been reported timely.
5.
Computation of In:eres: for a Regular Half-Year Payment
Pe~iod
Interest on
ma~ketable
Treasury inflation-indexed
securities is payable or. a semiannual basis.
pe~iod
interest payment
months.
Examples
0:
is a full half-year or six calendar
ha~f-year
periods are January 15 to
July 15, and April 15 to October 15.
will be a fixed
The regular
pe~centage
An interest payment
of the value of the inflation-
adjusted principal, in current dollars, for the date on
which it is paid_
Ir.:erest payments will be calculated by
mUltiplying one-half of the specified annual interest rate
for the inflation-indexed securities by the inflationadjusted principal for the interest payment date_
49
Specifically, a semiannual interest payment is computed on
the basis of one-half of one year's interest regardless of
the actual number of days in the half-year.
Example.
A 10-year inflation-indexed note paying 3%
interest was issued on July 15, 1996, with the first
interest payment on January 15, 1997.
The Ref CPI on July
15, 1996 (Ref CPI!ssueDlle) was 120, and the Ref CPI on January
15, 1997 (Ref CPI Dlte ) was 132.
For a par amount of $100,000,
the inflation-adjusted principal on January 15, 1997, was
(132/120) x $100,000, or $110,000.
This amount was then
multiplied by .03/2, or .015, resulting in a payment of
$1,650.00.
C. Accrued Interest
*****
For a fixed-principal 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
be used in computing the accrued interest.
The decimal is
multiplied by the number of days for which interest has
accrued.
If a reopened fixed-principal security 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, and
50
a separate daily interest decimal must be multiplied by the
respective number of days in each half-year period during
which interest has accrued.
All accrued interest
computations are rounded to five decimal places for a $1,000
inflation-adjusted principal, using normal rounding procedures.
Accrued interest for a par amount of securities
greater than $1,000 is calculated by applying the
appropriate multiple to accrued interest payable for $1,000
par amount,
rounded to five decimal places.
For an inflation-indexed security, accrued interest
will be calculated as shown in Section III, Paragraphs A and
B of this Appendix.
EXAMPLES.
(i)
(ii)
16.
(1)
Fixed-PrinciDal Securities
Involving One Half-Year: ***
Involving Two Half-Years: ***
Appendix B, Section II is amended by removing footnote
1, revising the Section heading,
~C=~,
revising the definition of
and revising the headings of paragraphs A through G to
read as follows:
II. FORMULAS FOR CONVERSION OF
FIXED-PRINCIPAL SECURITY YIELDS
TO EQUIVALENT PRICES
51
Definitions
*****
c
=
the regular annual interest per $100, payable
semiannually, e.g., 10.125 (the dollar equivalent
of a 10-1/8% interest rate)
*****
A.
For fixed-principal securities with a regular first
interest payment period:
*****
B.
For fixed-principal securities with a short first
interest payment period:
*****
c.
Fay fixed-princiDal securities with a lana first
interest payment period:
*****
D.
(1)
For fixed-principal securities reopened durina a
regular interest period where the purchase price includes
predetermined accrued interest.
(2)
For new fixed-princiDal securities accruing
interest from the coupon frequency date immediately
precedina the issue date, with the interest rate established
in the auction beina used to determine the accrued interest
payable on the issue date.
*****
E.
For fixed-principal securities reopened during the
regular portion of a long first payment period:
52
*****
F.
For fixed-principal securities reopened during a short
first payment period:
*****
G.
For fixed-principal securities reopened during the
fractional portion (initial short period) of a lona first
payment period:
*****
17.
Appendix B is amended by redesignating Section I I I as
Section IV and adding a new Section I I I to read as follows:
III. FORMULAS FOR CONVERSION OF
INFLATION-INDEXED SECURITY YIELDS
TO EQUIVALENT PRICES
Definitions
= unadjusted or real price per 100 (dollars)
P
p,JJ
A
=
inflation adj usted price; P x Index RatioD,U!
= unadjusted accrued interest per $100 original principal
A,uj =
inflation adj usted accrued interest; A x Index Ratiooat.c
SA
settlement amount including accrued interest in current
=
dollars per $100 original principal;
P~
+ A,~
r
days from settlement date to next coupon date
s
days in current semiannual period
i
real yield, expressed in decimals
(e.g., 0.0325)
53
C
= real annual coupon, payable semiannually, in terms of
real dollars paid on $100 initial, or real, principal of
the security
n
= number of full semiannual periods from issue date to
maturity date, except that, if the issue date is a
coupon frequency date, r. will be one less than the
number of full semiannual periods remaining until
maturity.
Coupon frequency dates are the two semiannual
dates based on the maturity date of each note or bond
Fo~
issue.
example, a security maturing on July 15,
2026 would have coupon frequency dates of January 15 and
July 15.
v = 1/(1
+
i/2)n = present value of 1 due at the end of n
periods
(1 - v) / ( i /2)
an l
v
=
+
..;:.
present value of 1 per
+
v3
+
pe~iod
•••
+
v
for n periods
Date = valuation date
D
= the number of days
t
the month in which Date falls
calendar day corresponding to Date
CPI = Consumer
CPI M
i~
=
P~ice
Index number
CPI reported for the calendar month M by the Bureau
of Labor Statistics
Ref CPI M = reference
cpr
for the first day of the calendar
month in which Date falls, e. g., Ref CPIAPril1 is
the CPI J""lJ.1r:
Ref CPI M 1 = reference CPI for the first day of the calendar
+
54
month immediately following Date
Ref CPI Oatc
=
Ref CPI M
+
[(
t
- 1) ID] [Ref CPI M + 1
-
Ref CPI M ]
Index RatioOal<: = Ref CPIoatc/Ref CPIlssueOatc
A.
For inflation-indexed securities with a regular
first interest payment period:
Formulas:
P
F~
(C/2)
- (C/2)a nl - 100v n
1 _ (rls) (i/2)
-
[(s - r) Is] (C/2)
= P x Index Ratio om
[(s
A =
A,OJ
=
=
-
r)/s]
x
(C/2)
A x Index Ra t i
Example.
0D~lc
The Treasury issues a 10-year inflation-
indexed note or. July 15, 1996.
The note is issued at a
discount to yield 3.1%
The note bears a 3% real
(real).
coupon, payable on January 15 and July 15 of each year.
base CPI index app:icab:e to this note is 120. 1
The
Calculate
the settlement amount.
I This number is normally derived using the
interpolative process described in Appendix B, Section I,
Paragraph B.
55
Definitions:
C = 3.00
1
0.0310
=
n = 19
(There are 20 full semiannual periods but n is
reduced by 1 because the issue date is a coupon
frequency date. )
r
= 184
(July 15,
1996 to January 15,
s
184
(July 15,
1996 to January 15, 1997)
Ref
CPID3~
1997)
120
=
Ref CPIIssue Dote
1:? 0
=
Resolution:
120/120
A
A,JI
=
[(184 - 184)/184J
=
0 x 1
=
x 3/2 = 0
0
"V' = 1/(1 + i/2)n = 1/(1
(1 - "V') / ( i /2)
anl
=
=
P
=
p
=
+
.031/2)19 = 0.74658863
(1 - O. 74 65 8 8 6 3 ) / ( . 03 1 /2 )
16.34912065
(C/2) - (C/2)a nl -100v
1 ... (r/s) (i/2)
n
_ [(s -r)/s](C/2)
(3/2) ... (3/2) (16.349:'2065) ... 100 (0.74658863)
1 - (184/184) (0.031/2)
p
=
1
1. 5 ... 24.52368098 ... 74.658863
1.01550000
_ 0
_ [(184 - 184) /184] (3/2
56
P
=
P
100.68254398
1.01550000
99.145784
= 99.146
P
P~
P x Index
P~
99.146 x 1 = 99.146
SA = 99.146
+
Ratio~~
0 = 99.146
B. For inflation-indexed securities reopened durina a
regular interest period where the purchase price includes
predetermined accrued inteyest:
Bidding:
The dol lay amount of each bid is in terms of the par
amount.
For example, if the Ref CPI applicable to the issue
date of the note is 12C, and the reference CPI applicable to
the reopening issue date is 132, a bid of $10,000 will in
effect be a bid of $10,000 x
(132/120), or $11,000.
Formulas:
=
P
P,ur
A
=
=
(C/2) - (C/2)a nl ... 100v
1 - (r/s) (i/2)
P x Index Ra tioo,!c
[(s - r)/s] x
(C/2)
n
_
[(s _ r) Is] (C/2)
57
~dj
=
A x Index RatioD~tc
SA
=
P~dj + ~dj
Index RatioD~le = Ref CPID~tc/Ref CPIlssue D~tc
Example.
A 3% 10-year inflation-indexed note was
issued July 15, 1996, due July 15, 2006, with interest
payments on January 15 and July 15.
For a reopening on
April 15, 1997, with inflation compensation accruing from
July 15, 1996 to April 15, 1997, and accrued interest
accruing from January 15, 1997 to April 15, 1997 (90 days),
solve for the price per 100 (P) at a real yield, as
determined in the reopening auction, of 3.40%.
The base
index applicable to the issue date of this note is 120 and
the reference CPI applicable to April 15, 1997, is 132.
Definitions:
C
=
3.00
i
=
0.0340
n
=
18
r
=
91 (April 15, 1997 to July 15, 1997)
s
=
181 (January 15, 1997 to July 15, 1997)
Ref
CPID~IC
=
Ref CPIlssuc D~IC
132
=
120
Resolution:
Index Ra t
iOD~lc
Ref CPID~le/Ref CPIlssucD~tc
=
132/120
=
1.100
58
V' = 1/(1 + i/2)n = 1/(1 + .0340/2)18 = 0.73828296
(1 - V') / (i /2)
an1
=
=
P
P =
=
15.39512000
(C/2)
(C/2) anl + 100v
1 ... (r/s) (i/2)
(3/2)
p
+
+
_ [(s _ r) Is] (C/2)
(3/2) (15.39512000) + 100(0.73828296)
1 ... (91/181) (0.0340/2)
=
97.586905
P
=
96.841049
p
:;
96.841
0
p X
- "u: =
-
0.745856
Index Ra ~ io o","
96.841 x :i.100
p'U)
=
:;
106.5251
106.525
[(181 - 91)/181]
x 3/2 :; 0.745856
A,J)
A x Index Ratioo'lC
n
""'U,
0.745856 x 1.100
SA
p. U) + A,O) :; 106.525 + 0.820442
SA
=
*****
_ [(181 - 91)/181] (3/2)
1.5 ... 23.09268 - 73.828296 _ (90/181) (1.5)
1.00854696
P
A :;
n
98.420976 - 0.745856
1.00854696
p =
P 'U)
= (1 - O. 73 82 82 9 6 ) / ( . 034 0/2 )
107.345442
=
0.820442
59
18.
Part 356 is amended by adding new Appendixes C and D to
read as follows:
APPENDIX C TO PART 356--INVESTMENT CONSIDERATIONS
I.
INFLATION-INDEXED SECURITIES
A. Principal and Interest Variability
An
investmen~
in securities with principal or interest
determined by reference to an inflation index involves
factors not associated with an investment in a fixedprincipal security.
Such factors may include, without
limitation, the possibility that the inflation index may be
subject to significant changes, that changes in the index
mayor may not correlate to changes in interest rates
generally 0= witr. changes in other indices, that the
resulting interest may be greater or less than that payable
on other securities of similar maturities, and that, in the
event of sustained deflation, the amount of tr.e semiannual
interest payments, the inflation-adjusted principal of the
security, and the value of stripped components, will
decrease.
Howeve=,
if at maturity the inflation-adjusted
principal is less than a security's par amount, an
additional amount
additional
amoun~
wil~
be paid at maturity so that the
plus the inflation-adjusted principal
equals the par amount.
Regardless of whether or not such an
additional amount is paid, interest payments will always be
based on the inflation-adjusted principal as of the interest
60
payment date.
If a security has been stripped, any such
additional amount will be paid at maturity to holders of
principal components only.
(See
§
356.30.)
B. Tradino in the Secondary Market
The Treasury securities market is the largest and most
liquid securities market in the world.
expects that there
w~ll
While Treasury
be an active secondary market for
inflation-indexed secu=ities, that market initially may not
be as active
o~
liquid as the secondary market for Treasury
fixed-principal securities.
In addition, as a new product,
inflation-indexed secu=ities may not be as widely traded or
as well understood as Treasury fixed-principal securities.
Lesser liquidity and fewer market participants may result in
la=ger spreads
ir.dexed
betwee~
secu~i:ies
p~incipal
t~a~
bid ar.d asked prices for inflationthe bid-asked spreads for fixed-
secu=ities with the same time to maturity.
Large=
bid-asked spreads normally result in higher transaction
costs and/or
lowe~
ove=al: returns.
The liquidity of an
inflation-indexed secu=ity may be enhanced over time as
Treasury issues
addi:i~r.al
amounts or more entities
participate in the ma=ket.
C. Tax Considerations
Treasu=y inflation-indexed securities and the stripped
interest and
p~incipal
components of these securities are
61
subject to specific tax rules provided by Treasury
regulations issued under sections 1275(d) and 1286 of the
Internal Revenue Code of 1986, as amended.
D. Indexing Issues
While the CPI measures changes in prices for goods and
services, movements in the CPI that have occurred in the
past are not necessarily indicative of changes that may
occur in the future.
The calculation of the index ratio incorporates an
approximate three-month lag, which may have an impact on the
trading price of the securities, particularly during periods
of significant, rapid changes in the index.
The CPI is reported by the Bureau of Labor Statistics,
a bureau within the Department of Labor.
The Bureau of
Labor Statistics operates independently of the Treasury and,
therefore, Treasury has no control over the determination,
calculation, or
pub~ication
of the index.
For a discussion
of how the CPI will be applied in various situations, see
Appendix B, Section I, Paragraph B.
In addition, for a
discussion of actions that Treasury would take in the event
the 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
62
interests of an investor in the security, see Appendix B,
Section I, Paragraph B.4.
APPENDIX D TO PART 356--DESCRIPTION OF THE
CONSUMER PRICE INDEX
The Consumer Price Index ("CPI") for purposes of
inflation-indexed securities is the non-seasonally adjusted
u.s. City Averaae All Items Consumer Price Index for All
U~ban
Consumers, published monthly by the Bureau of Labor
Statistics of the Department of Labor.
The CPI is a measure
of the average change in consumer prices over time in a
fixed market basket of goods and services, including food,
clothing, shelter, fuels,
transportation, charges for
doctors' and dentists' services, and drugs.
In calculating the index, price changes for the various
items are averaged together with weights that represent
.their importance in the spending of urban households in the
United States.
The contents of the market basket of goods
and services and the weights assigned to the various items
are updated periodically to take into account changes in
consumer expenditure patterns.
The CPI is expressed in relative terms in relation to a
time base r€ference period for which the level is set at
100.
For example, if the CPI for the 1982-84 reference
period is 100.0, an increase of 16.5 percent from that
63
period would be shown as 116.5.
The CPI for a particular
month is released and published during the following month.
From time to time, the CPI is rebased to a more recent base
reference period.
The base reference period for a
particular inflation-indexed security will be provided on
the offering announcement for that security.
Further details about the CPI may be obtained by
contacting the Bureau of Labor Statistics.
19.
Exhibit A to
Par~
356 is amended by adding a new
Section IV to the list of section titles and to the text of
Exhibit A to read as follows:
Exhibit A to Part 356--Sample
Announcements of Treasury
Offerings to the Public
*****
IV. Treasury Inflation-Indexed Note Announcement
*****
IV. TREASURY INFLATION-INDEXED NOTE ANNOUNCEMENT
EMBARGOED UNTIL 2:30 P.M.
October 2, 20XX
CONTACT:
Office of Financing
202/219-3350
TREASURY TO AUCTION $5,500 MILLION OF
10-YEAR INFLATION-INDEXED NOTES
The Treasury will auction $5,500 million of 10-year
inflation-indexed notes to raise cash.
In addition, there
64
is $7,906 million of publicly-held securities maturing
October 15, 20XX.
In addition to the public holdings, Federal Reserve
Banks hold $327 million of the maturing securities for their
own accounts, which may be exchanged for additional amounts
of the new securities.
The maturing securities held by the public include $584
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.
The auction will be conducted in the single-price
auction format.
All competitive and noncompetitive awards
will be at the highest yield of accepted competitive
tenders.
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 Offering
Circular (31 CFR Part 356) for the sale and issue by the
Treasury to the public of marketable Treasury bills, notes,
and bonds.
Details about the new security are given in the
attached offering highlights.
HIGHLIGHTS OF TREASURY OFFERING TO THE PUBLIC OF
lO-YEAR INFLATION-INDEXED NOTES TO BE ISSUED OCTOBER 15, 20XX
October 2, 20XX
Offe~inc
Amount .......... S5,sOG
m~llion
Desc~iotion of Offerinc:
Term and type of security: 10·year inflationindexed notes
Series ................... D - 2 OX-X
CUSIP number .... ~ ........ 9l2xx.X XX X
Auc~ion date ............. Octobe~ 9, 20XX
Issue date ............... October 15, 20XX
Dated date ............... Octobe~ 15, 20XX
Maturity date ............ October 15, 20XX
Interest Rate
Determined based on the
highest accepted bid
Real yield ......... Determi~ed at auction
Interest payment dates: Apr~l 15 and October 15
Minimum bid amount ....... ·········· Sl,OOO
Mul tiples . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000
Accrued interest payable by investor: None
STRIPS Information:
Due dates and CUSIP numbers
for additional TINTs:
912XXX
April 1S, 20XX
XXX
October 1S, 20XX
XXX
April 1S, 20XX
XXX
October 15, 20XX
XXX
April 15, 20XX
XXX
October 15, 20XX
XXX
April 15, 20XX
XXX
October 15, 20XX
XXX
April 1S, 20XX
XXX
October 15, 20XX
XXX
April 15, 20XX
XXX
October 15, 20XX
XXX
April 15, 20XX
XXX
October 15, 20XX
XXX
April 15, 20XX
XXX
65
Premium or discount:
Determined at auction
STRIPS Information:
Minimum amount required .. Determined at auction
Corpus CUSIP number . . . . . . . . . . . . . . . . 9l2XXX XX X
Submission of Bids:
Noncompetitive bids:
October 15, 20XX
April 15, 20XX
October 15, 20XX
April 15, 20XX
October 15, 20XX
XX
XX
XX
XX
XX
X
X
X
X
X
Will be accepted in full up to $5,000,000 at the highest
accepted yield.
Competitive bids:
(1) Must be expressed as a rea! yield with three decimals, e.g.,
(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 $ ___ billion o~ 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 5:ncle Yield ..
Maximum Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35~
35~
3.120~.
of public offering
of public offering
Receipt of Tenders:
Noncompetitive tenders: Prior to 12:00 noon Eastern Daylight Saving time on
auct:or: day.
Competitive tenders:
Prior to l:OC p.m. Eastern Daylight Saving time on auction
day.
Pa'.rrnent Te:rms:
Full pa-yme:1t ...·:th tender or by charge to a funds account at a
Federal Reserve Bank on issue date.
Indexi:1c Information:
CP: Base P. eference Period:
Re: CP:;: 10/15/20x...'{:
~9:·::':-x.:·:
XX.:·:.XX.X.XX
PUBLIC DEBT NEWS
Depart.ment of the Treasury • Bureau of the Public Debt • Washington, DC 20239
For Immediate Release
December 31, 1996
Contact:
TREASURY'S INFLATION-INDEXED NOTES
JANUARY REFERENCE CPI NUMBERS AND DAILY INDEX RATIOS
Public Debt announced today the reference Consumer Price Index
(CPI) numbers and the daily index ratios for the month of January
for the new lO-Year Treasury inflation-indexed notes.
This
information is based on the non-seasonally adjusted U.S. City
Average All Items Consumer Price Index for All Urban Consumers
(CPI-U) published by the Bureau of Labor Statistics of the U.S.
Department of Labor. This announcement is made in anticipation of
the auction of the inflation-indexed notes on January 29, 1997.
In addition to the publication of the reference CPIs (Ref CPI) and
index ratios, this release provides the non-seasonally adjusted
CPI-U for the prior three-month period.
Treasury intends to announce the reference CPI numbers and the
related index ratio monthly for at least one year.
This information is available through the Department's Office of
Public Affairs automated fax system by calling 202-622-2040 and
requesting document number 1429. The information will be available
monthly on the Internet at the Bureau of the Public Debt's home
page at the following address:
http://www.publicdebt.treas.gov
The information for February is expected to be released on January
14, 1997.
000
PA-243
Contact: Office of Financing
2Q2-219-335O
TREASURY 10-YEAR INFLAliON-INDEXED NOTES
SERIES:
A-2007
CU5IP:
9128272M3
AUCT10N DATE:
January 29, 1997
ORIGINAL ISSUE DATED DATE: January 15, 1997
ORIGINAL ISSUE DATE:
February 6,1997
MATURITY DATE:
January 15, 2007
Ref CPI on DATED DATE:
158.43548
TABLE FOR MONTH OF:
January, 1997
NUMBER OF DAYS IN MONTH:
31
CPt-U (NSA) Sep. '96
157.8
CPI-U (NSA) Oct. '96
CPI-U (NSA) Nov. '96
158.3
158.6
Ref CPt and Index Ratios for January 1997
Calendar day
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
1997
RefCPI
158.30000
158.30968
158.31935
158.32903
158.33871
158.34839
158.35806
158.36n4
lSa.3n42
158.38710
1S8.396n
158.40645
158.41613
158.42581
158.43548
158.44516
158.45484
158.46452
158.47419
158.48387
158.49355
158.50323
158.51290
158.52258
158.53226
158.54194
158.55161
158.56129
158.57097
158.58085
158.59032
Index Ratio
1.00000
1.00006
1.00012
1.00018
1.00024
1.00031
1.00037
1.00043
1.00049
1.00055
1.00061
1.00067
1.00073
1.00079
1.00086
1.00092
1.00098
From: TREASURY PUBLIC AFFAIRS
20009
1-15-97 5:55pm
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
December 30, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $13,514 million of 13-week bills to be issued
January 2, 1997 and to ~ature April 3, 1997 were
accepted today (CUSIP: 9l27942N3).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Discount
Bit!:
Low
High
Average
5.04%
S.08t
S.08t
Investment
Bir,e
S.18\'
5.22t
5.22t
E:t:i~!:
98.726
98.716
98.716
~enders at the high discount rate were allotted 62%.
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TCTALS
Type
Corr.pet i t i ve
Noncompetitive
Subtotal, Public
Federal Reserve
Foreiqn Offi,=ial
lnetltutione
TOTALS
5.06 -- 98 721
Received
$43,624,820
Accepted
$13,514,053
$38,044,222
1.370.868
$39,415,090
$7,933,455
3,661,430
3,661,430
548,300
$43,624,820
__ .__ 548,300
$13,514,053
5 07 -- 98.718
1.370.868
$9,304,323
p. 97 of 99
UBLIC DEBT NEWS
Department of the Treasury •
Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
December 30, 1996
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $13,557 million of 26-week bills to be issued
January 2, 1997 and to mature July 3, 1997 were
accepted today (CUSIP: 9127945D2).
RANGE OF ACCEPTED
COMPETIT::-Vr:: BIDS:
Low
High
Average
Discount
Rate
5.09%5.ll%"
5.1190
Investment
Rate
5.30%5.32%'
5.3290
Price
97.427
97.417
97.417
Tenders at the high discount rate were allotted 62%'.
The investment rate is the equivalent coupon-issue yield.
TENDERS RECEIVED AND ACCEPTED (in thousands)
TOTALS
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
5.10 -- 97.422
RR-1431
Received
$42,492,870
Accepted
$13,557,321
$34,213,910
1.189,860
$35,403,770
$5,278,361
1.189,860
$6,468,221
3,500,000
3,500,000
3,589,100
$42,492,870
3,589,100
$13,557,321
20009
From: TREASURY PUBLIC AFFAIRS
1-15-97 5:56pm
PUBLIC DEBT NEWS
Department oCthe Treasury • Bureau of the PubHc Debt • Washington, DC 20239
Por Immediate Releaee
Contact: Office of Financing
(~02)
December 31, 1996
219-3350
TREASURY'S INFLATION-INDEXED NOTBS
Jl-.:WARY REFBRENCB CPI NUMBERS Mm
f\~IYJY
INDEX llTIOS
Public Debt announced today the reference Consumer Price Index
(CPI) numbers and the daily index ratios for the month ot January
tor the new lO-Year Treasury inflation-indexed notes.
This
infor:mation is based on the non-seasonally adjusted U.S. City
Average All Items Consumer Price Index for All Urban Consumers
(CPI-U) published by the Bureau of Labor Statistics of the O.S.
DepartmQnt of Labor. This announcement is made ill anticipation of
the auction of the inflation-indexed notes on January 29, 1997.
In addition to the publication of the reference ePIs (Ref CPI) and
index ratios, this release provides the non-seasonally adjusted
CPI-U for the prior three-month period.
Treasury intends to announce the reference CPI numbers and the
related index ratio monthly for at least one year.
This information is available through the Department's Office of
PUblic Affairs automated fax system by calling 202-622-2040 and
requesting document nwnber 1429. The information will be available
monthly on the Internet at the Bureau of the PUblic Debt's home
page at the following address:
http://www.publicdebt.treas.gov
The information for February is expected to be released on January
14, 1997.
000
PA-243
RR-lil :32
p. 98 of 99
fo: 20009
From: TREASURY PUBLIC AFFAIRS
ConlaGt: Ob 01 FIn.nc/no
1-15-97 5:55pm
202-219-3350
TREASURY 10-YEAR INFlATION-INDEXED NOTES
SERIES:
/4,.2007
CUSlP:
9128272M3
AUCTION DATE:
January 2i. 1887
ORIGINAL ISSUE DATED DATE: January 15.1997
ORIGINAL Issue DATE:
February 8, j 897
MATURITY DATE:
January 1tJ. 2007
RafCPt on DATED DATE:
158.43548
TABlE FOR MONTH OF:
January, 1.7
NUMBER OF DAYS IN MONTH:
31
CPI-U (NSA) Sep. '98
CPI-U (NSA) Cd. lee
CPI-U (NSA) Nov. '96
157.8
158.3
158.8
Ref cpt and Index Ratios for January 1m
Catendar day
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
danuary
January
January
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
18
17
18
19
20
1997
1887
1997
1997
RefCPI
158.30000
158.30968
1!8.31935
158.32903
1iQ7
1997
1997
1997
1997
158.33871
158.U839
158.35808
158.36n.
158.3n42
158.38710
1997
1997
158.396n
1997
1997
1987
1997
158.40845
158.41813
158.42581
158.43548
1997
158.44518
158.454&4
158.48452
1997
1997
1997
1997
Index Ratio
158.47419
158.48387
158.48355
1.00000
1.00006
1.00012
1.00018
1.00024
1.00031
22
1997
1997
23
1987
158.51290
1.()()(M9
24
25
1997
158.52258
1.00055
1997
158.53226
26
1997
27
28
28
30
1997
1997
1a7
1997
158.54194
158.55181
1.00061
1.00067
21
158.50323
1,rlOO37
1.00043
1.00073
158.58129
1.00079
158.67097
158.58085
1.00088
1'()OO92
p. 99 of 99
1) [
P ,\ It T :\1 E ~ T
0 F
THE
'IREASURY!l1
T REA SUR Y
NEW S
1500 PE!'iNSYLVANL-\ A\ "ENVE. :".W.· WASHINGTOl'. D.C.· 20220· (202) 622-2960.
EMBARGOED UNTIL 12: 00 NOON
December 31, 1996
CONTACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $25,000 million, to be issued January 9,
1997. This offering will result in a paydown for the Treasury of
about $2,775 million, as the maturing 13-week and 26-week bills
are outstanding in the amount of $27,781 million. In addition to
the maturing 13-week and 26-week bills, there are S18,910 million
of maturing 52-week bills. The disposition of this latter amount
was announced last week.
Federal Reserve Banks hold $12,007 million of bills for
their own aocounts in the three maturing issues. These may be
refunded at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks bold $5,268 million of the thre.
maturing issue. as agents for foreign and international monetary
authorities. These may be refunded within the offering amount
at the weighted average 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. For purposes of determining such additional
amounts, foreign and internat:onal :-:1onet.ary authorities are
considered to hold the entire $5,268 million of the or1ginal 13week and 26-week issues.
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 (31 CFR Part 356, as amended) for the sale and
issue by the Treasury to the public of marKetable Treasury bills,
notes, and bonds.
Details about each of the new oecurities are given in the
offering highlight~.
~t.t~ched
000
Attachment
RR-1433
HIGHLIGHTS OP TlUtABURY OrpUIllQB OP DEnY BILLS
TO BE ISSUED ~y 9, 1997
December 31, 1996
OffOJ;inq Aaloupt .
.
.
.
•
$12,500 million
$12,500 million
91-day bill
182-day bill
pe.oriDtiog of OfferiAg,
Term and type of security
CUSIP number
. . . .
Auction date
Issue date
Maturity date
Original issue date
Currently outstanding
Minimum bid amount
Multiples . . . . . . .
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91279' 4E 1
January 6, 1997
January 9, 1997
April 10, 1997
October 10, 1996
$13,165 million
$10,000
$ 1,000
91279' 5F 7
January 6, 1997
January 9, 1997
July 10, 1997
January 9, 1997
$10,000
$ 1,000
The following rule, apply to all ,ecuriti•• mentioAed above,
Submission of Bids:
Accepted in full up to $1,000,000 at the average
Noncompetitive bids
discount rate of accepted competitive bide
(I) Must be expressed as a discount rate with
Competitive bids
two decimals, e.g., 7.10\.
(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 $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
35\ of public offering
at a Single Yield
35~ of public offering
Maximum Award . . . . .
Receipt of Tenders:
Noncompetitive tenders
competitive tenders .
Payment TermS . . .
Prior to 12:00 noon Eastern Standard time
on auction day
Prior to 1:00 p.m. Eastern Standard time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
@FedFRASER