31 C.F.R. Subpart C—Determination of Auction Awards; Settlement
Title 31 - Money and Finance: Treasury
(a) Determining the range and amount of accepted competitive bids— (1) Accepting bids. First we accept in full all noncompetitive bids that were submitted by the noncompetitive bidding deadline. After the closing time for receipt of competitive bids we start accepting those at the lowest yields or discount rates through successively higher yields or discount rates, up to the amount required to meet the offering amount. When necessary, we prorate bids at the highest accepted yield or discount rate as described below. If the amount of noncompetitive bids would absorb most or all of the offering amount, we will accept competitive bids in an amount sufficient to provide a fair determination of the yield or discount rate for the securities we are auctioning. (2) Accepting bids at the high yield or discount rate. Generally, the total amount of bids at the highest accepted yield or discount rate exceeds the offering amount remaining after we accept the noncompetitive bids and the competitive bids at the lower yields or discount rates. In order to keep the total amount of awards as close as possible to the announced offering amount, we award a percentage of the bids at the highest accepted yield or discount rate. We derive the percentage by dividing the remaining par amount needed to fill the offering amount by the par amount of the bids at the high yield or discount rate and rounding up to the next hundredth of a whole percentage point, for example, 17.13%. (b) Determining the interest rate for new note and bond issues. We set the interest rate at a (1) Single-price auctions. The interest rate we establish produces the price closest to, but not above, par when evaluated at the yield of awards to successful competitive bidders. (2) Multiple-price auctions. The interest rate we establish produces the price closest to, but not above, par when evaluated at the weighted-average yield of awards to successful competitive bidders. (c) Determining purchase prices for awarded securities. We round price calculations to six decimal places on the basis of price per hundred, for example, 99.954321 (See Appendix B to this part). (1) Single-price auctions. We award securities to both noncompetitive and competitive bidders at the price equivalent to the highest accepted discount rate or yield at which bids were accepted. For inflation-protected securities, the price for awarded securities is the price equivalent to the highest accepted real yield. (2) Multiple-price auctions—(i) Competitive bids. We award securities to competitive bidders at the price equivalent to each yield or discount rate at which their bids were accepted. (ii) Noncompetitive bids. We award securities to noncompetitive bidders at the price equivalent to the weighted average yield or discount rate of accepted competitive bids. [69 FR 45202, July 28, 2004, as amended at 69 FR 53621, Sept. 2, 2004] (a) Awards to submitters. We generally prorate bids at the highest accepted yield or discount rate under §356.20(a)(2) of this part. For example, if 80.15% is the announced percentage at the highest yield or discount rate, we award 80.15% of the amount of each bid at that yield or rate. A bid for $100 million at the highest accepted yield or discount rate would be awarded $80,150,000 in this example. We always make awards for at least the minimum to bid, and above that amount we make awards in the appropriate multiple to bid. For example, Treasury bills may be issued with a minimum to bid of $1,000 and multiples to bid of $1,000. Say we accept an $18,000 bid at the high discount rate, and the percent awarded at the high discount rate is 88.27%. We would award $16,000 to that bidder, which is an upward adjustment from $15,888.60 ($18,000 × .8827) to the nearest multiple of $1,000. If we were to award 4.65% of bids at the highest accepted rate, for example, the award for a $10,000 bid at that rate would be $1,000, rather than $465, in order to meet the minimum to bid for a bill issue. (b) Awards to customers. The same prorating rules apply to customers as apply to submitters. Depository institutions and dealers, whether submitters or intermediaries, are responsible for prorating awards for their customers at the same percentage that we announce. For example, if 80.15% is the announced percentage at the highest yield or discount rate, then each customer bid at that yield or rate must be awarded 80.15%. (a) Awards to noncompetitive bidders. The maximum award to any noncompetitive bidder is $5 million. This limit does not apply to bidders bidding solely through TreasuryDirect® or Legacy Treasury Direct® reinvestment requests. (b) Awards to competitive bidders. The maximum award is 35 percent of the offering amount less the bidder's net long position as reportable under §356.13. For example, in a note auction with a $10 billion offering amount, and therefore a maximum award of $3.5 billion, a bidder with a reported net long position of $1 billion could receive a maximum auction award of $2.5 billion. When the bids and net long positions of more than one person or entity must be combined, as is the case with investment advisers and controlled accounts (See §356.15(c).), we will use this combined amount for the purpose of this 35 percent award limit. [69 FR 45202, July 28, 2004, as amended at 69 FR 53622, Sept. 2, 2004; 70 FR 57440, Sept. 30, 2005] (a) After the conclusion of the auction, we will announce the auction results through a press release that is available on our Web site at www.publicdebt.treas.gov. (b) The press release will include such information as: (1) The amounts of bids we accepted and the amount of securities we awarded; (2) The range of accepted yields or discount rates; (3) The proration percentage; (4) The interest rate for a note or bond; (5) A breakdown of the amounts of noncompetitive and competitive bids we accepted from, and awarded to, the public; (6) The amounts of bids tendered and accepted from the Federal Reserve Banks for their own accounts; (7) The bid-to-cover ratio; and (8) Other information that we may decide to include. (a) Notice of awards—(1) Notice to submitters. We will provide notice to all submitters letting them know whether their bids were successful or not. (2) Notice to clearing corporations. If we are to deliver awarded securities under a delivery and payment agreement, we will provide notice of the awards to the clearing corporation that is a party to the agreement. (b) Notification of awards to customers. If you are a submitter for customers, you are responsible for notifying them of their awards. You are also responsible for notifying any intermediaries that forwarded successful bids to you. Similarly, an intermediary is responsible for providing notification of any awards to its customers and any intermediaries from whom it received bids. (c) Notification of awards and settlement amounts to a depository institution having an autocharge agreement with a submitter or a clearing corporation. We will notify each depository institution that has entered into an autocharge agreement with a submitter or a clearing corporation of the amount to be charged, on the issue date, to the institution's funds account at the Federal Reserve Bank servicing the institution. We will provide this notification no later than the day after the auction. (d) Customer confirmation. Any customer awarded a par amount of $500 million or more in an auction must send us a confirmation containing the information in paragraphs (d)(1) and (2) of this section. The confirmation must be sent no later than 10:00 a.m. on the day following the auction. The confirmation must be signed by the customer or authorized representative. If signed by an authorized representative, the confirmation must include the capacity in which the representative is acting. A submitter or intermediary submitting or forwarding bids for a customer must notify the customer of this requirement if we award the customer $500 million or more as a result of those bids. The information the customer must provide in writing is: (1) A confirmation of the awarded bid(s), including the name of the submitter that submitted the bid(s) on the customer's behalf, and (2) A statement indicating whether the customer had a reportable net long position as defined in §356.13. If a position had to be reported, the statement must provide the amount of the position and the name of the submitter that the customer requested to report the position. Securities bought in the auction must be paid for by the issue date. The payment amount for awarded securities will be the settlement amount as defined in §356.2. (See formulas in Appendix B.) There are several ways to pay for securities: (a) Payment by debit entry to a deposit account. If you are paying by debit entry to a deposit account as provided for in §356.17 (b) and (c), we will charge the settlement amount to the specified account on the issue date. (b) Payment by authorized charge to a funds account. Where the submitter's method of payment is an authorized charge to the funds account of a depository institution as provided for in §356.17 (c)(1) and (d), we will charge the settlement amount to the specified funds account on the issue date. (c) Payment through a certificate of indebtedness. If you are paying with the redemption proceeds of your certificate of indebtedness as provided for in §356.17(b), we will redeem the certificate of indebtedness for the settlement amount of the security and apply the proceeds on the issue date. (d) Payment with bids. If you paid the par amount with your bids as provided for in §356.17 (c)(2), you may have to pay an additional amount, or we may have to pay an amount to you, as follows: (1) When we owe an amount to you. If the amount you paid is more than the settlement amount, we will refund the balance to you after the auction. This will generally occur if you submit payment with your bids. A typical example would be an auction where the price is a discount from par and there is no accrued interest. (2) When you must remit an additional amount. If the settlement amount is more than the amount you paid, we will notify you of the additional amount due. You may owe us such an additional amount if the auction calculations result in a premium or if accrued interest or an inflation adjustment is due. If your securities are to be held in TreasuryDirect®, we will collect this amount through the same payment method that you previously authorized for the transaction. If your securities are to be held in Legacy Treasury Direct®, you will be responsible for remitting this additional amount immediately. [69 FR 45202, July 28, 2004, as amended at 70 FR 57440, Sept. 30, 2005]
Title 31: Money and Finance: Treasury
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)
Subpart C—Determination of Auction Awards; Settlement
§ 356.20 How does the Treasury determine auction awards?
§ 356.21 How are awards at the high yield or discount rate calculated?
§ 356.22 Does the Treasury have any limitations on auction awards?
§ 356.23 How are the auction results announced?
§ 356.24 Will I be notified directly of my awards and, if I am submitting bids for others, do I have to provide confirmations?
§ 356.25 How does the settlement process work?
