Appendix C to Part 359 - Investment Considerations
31:2.1.1.1.56.6.17.1.20 : Appendix C
Appendix C to Part 359 - Investment Considerations
1. What are some index contingencies?
(a) If a previously reported CPI-U is revised, we will continue
to use the previously reported CPI-U in calculating redemption
values.
(b) If the CPI-U is rebased to a different year, we will
continue to use the CPI-U based on the base reference period in
effect when the security was first issued, as long as that CPI-U
continues to be published.
(c) If, while an inflation-indexed savings bonds is outstanding,
the applicable CPI-U is discontinued or, in the judgment of the
Secretary, fundamentally altered in a manner materially adverse to
the interests of an investor in the security, or, in the judgment
of the Secretary, altered by legislation or Executive Order in a
manner materially adverse to the interests of an investor in the
security, 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. The Secretary's
determinations in this regard will be final.
(d) If the CPI-U for a particular month is not reported by the
last day of the following month, we will announce an index number
based on the last 12-month change in the CPI-U available. Any
calculations of our payment obligations on the inflation-indexed
savings bonds that rely on that month's CPI-U will be based on the
index number that we have announced.
2. How will inflation lag affect my Series I savings
bonds?
The inflation rate component of investor earnings will be
determined twice each year. This rate will be the percentage change
in the CPI-U for the six months ending each March and September.
The rate will be included in the composite rate that is announced
each May and November. For Series I bonds offered from September 1,
1998, through October 31, 1998, the inflation rate component of
investor earnings will be the percentage change in the CPI-U for
the six months ending March 31, 1998. This rate will be included in
the composite rate that is announced for Series I bonds offered
effective from September 1, 1998, through October 31, 1998. In the
event the Secretary, or the Secretary's designee, announces a
composite rate at an effective date other than May 1 or November 1,
the announcement will specify the period to be used to calculate
the semiannual inflation rate. Each composite rate will be
effective for the entirety of the applicable rate period that
begins while the rate is in effect. Thus, an inflation rate may
affect interest accruals from 3 to 13 months from the date that the
CPI-U is measured.
Example 1.The inflation rate determined from the CPI-U for the
six-month period from October, 2003, through March, 2004, will be
included in the composite rate announced in May, 2004. For a bond
purchased in May 1999, this rate would go into effect immediately,
since a new semiannual rate period for this bond will begin in May,
2004. Series I bonds issued in May begin new semiannual rate
periods in the months of May and November. In this example, the
inflation rate will have its earliest impact in June 2004, when
interest from May accrues, three months after the end of the
six-month CPI-U period that ends in March, 2004. Example 2.The May
1, 2004, rate will apply similarly to a bond purchased in October
1999. Series I bonds issued in October begin new semiannual rate
periods in the months of April and October. Thus, for this bond,
the May 1, 2004, composite rate (which includes the inflation rate)
will not go into effect until a new semiannual rate period begins
on October 1, 2004. This rate, therefore, will determine the
inflation-indexed portion of each interest accrual from November,
2004, through April, 2005. In this example, the inflation rate will
have its latest impact in April 2005, 13 months following the
six-month CPI-U period that ended March 31, 2004.