Sec. 344.5 Redemption.
(a) Redemption before maturity--
(2) Notice. Notice of redemption prior to maturity must be submitted, either
on a designated Treasury form or by letter, by the official(s) authorized to
redeem the securities, as shown on the final subscription form, to the Division of
Special Investments, Bureau of the Public Debt, 200 Third Street, P.O. Box
396, Parkersburg, WV 26102-0396. The notice must be received by Public Debt no
less than ten days before the requested redemption date, but no more than sixty
days before the requested redemption date. The notice must show the account
number, the maturities of the securities to be redeemed, and the Tax Identification
Number of the government body. A notice of redemption prior to maturity can not
be canceled.
(3) Redemption proceeds--Subscriptions on or after October 28, 1996. For
securities subscribed for on or after October 28, 1996, the amount of the redemption
proceeds is calculated as follows:
(i) Interest. If a security is redeemed before maturity on a date other than a
scheduled interest payment date, interest is paid for the fractional interest
period since the last interest payment date.
(ii) Redemption value. The remaining interest and principal payments are
discounted by the current Treasury borrowing rate for the remaining term to maturity
of the security redeemed. This results in a premium or discount to the
government body, depending on whether the current Treasury borrowing rate is lower or
higher than the stated interest rate of the early-redeemed SLGS security. This
does not apply to SLGS securities subscribed for before October 28, 1996. The
term ``current Treasury borrowing rate'' means the applicable rate shown in the
table of maximum interest rates payable on United States Treasury
securities--State and Local Government Series--for the day the request for early redemption
is received by Public Debt, plus five basis points. There is no market charge
for the redemption of zero interest time deposit securities subscribed for on or
after October 28, 1996. Redemption proceeds in the case of a zero-interest
security are a return of the principal invested. The formulas for calculating the
redemption value under this section, including examples of the determination of
premiums and discounts are set forth in Appendix B of this Part.
(4) Redemption proceeds--Subscriptions from September 1, 1989, through October
27, 1996. For securities subscribed for from September 1, 1989, through
October 27, 1996, the amount of the redemption proceeds is calculated as follows:
(i) Interest. If a security is redeemed before maturity on a date other than a
scheduled interest payment date, interest is paid for the fractional interest
period since the last interest payment date.
(ii) Market charge. An amount shall be deducted from the redemption proceeds
in all cases where the current borrowing rate of the Department of the Treasury
for the remaining period to original maturity of the security prematurely
redeemed exceeds the rate of interest originally fixed for such security. The amount
shall be the present value of the future increased borrowing cost to the
Treasury. The annual increased borrowing cost for each interest period is determined
by multiplying the principal by the difference between the two rates. For
notes and bonds, the increased borrowing cost for each remaining interest period to
original maturity is determined by dividing the annual cost by two. For
certificates, the increased borrowing cost for the remaining period to original
maturity is determined by multiplying the annual cost by the number of days
remaining until original maturity divided by the number of days in the calendar year.
Present value shall be determined by using the current Treasury borrowing rate
as the discount factor. The term ``current Treasury borrowing rate'' is
determined in section 344.5(a)(3)(ii). Where redemption is requested on a date less
than thirty days before the original maturity date, such applicable rate is the
rate shown for a security with a maturity of thirty days. The market charge for
bonds, notes, and certificates of indebtedness can be computed by use of the
formulas in Appendix A to this Part.
(5) Redemption proceeds--Subscriptions from December 28, 1976, through August
31, 1989. For securities subscribed for from December 28, 1976, through August
31, 1989, the amount of the redemption proceeds is calculated as follows:
(i) Interest. Interest for the entire period the security was outstanding
shall be recalculated on the basis of the lesser of the original interest rate at
which the security was issued, or the interest rate that would have been set at
the time of the initial subscription had the term for the security been for the
shorter period. If a note or bond is redeemed before maturity on a date other
than a scheduled interest payment date, no interest is paid for the fractional
interest period since the last interest payment date.
(ii) Overpayment of interest. If there have been overpayments of interest, as
determined under paragraph (a)(5)(i) of this section, there shall be deducted
from the redemption proceeds the aggregate amount of such overpayments, plus
interest, compounded semi-annually thereon, from the date of each overpayment to
the date of redemption. The interest rate used used in calculating the interest
on the overpayment shall be one-eighth of one percent above the maximum rate
that would have applied to the initial subscription had the term of the security
been for the shorter period.
(iii) Market charge. An amount shall be deducted from the redemption proceeds
in all cases where the current borrowing rate of the Department of the Treasury
for the remaining period to original maturity of the securityprematurely
redeemed exceeds the rate of interest originally fixed for such security. The amount
shall be calculated using the formula in paragraph (a)(3)(ii) of this section.
(6) Redemption proceeds--Subscriptions on or before December 27, 1976. For
securities subscribed for on or before December 27, 1976, the amount of the
redemption proceeds is calculated as follows.
(i) The interest for the entire period the security was outstanding shall be
re-calculated on the basis of the lesser of the original interest rate at which
the security was issued, or an adjusted interest rate reflecting both the
shorter period during which the security was actually outstanding and a penalty. The
adjusted interest rate is the Treasury rate which would have been in effect on
the date of issuance for a marketable Treasury certificate, note, or bond
maturing on the quarterly maturity date prior to redemption (in the case of
certificates), or on the semi-annual maturity period prior to redemption (in the case
of notes and bonds), reduced in either case by a penalty which shall be the
lesser of:
(A) One-eighth of one percent times the number of months from the date of
issuance to original maturity, divided by the number of full months elapsed from
the date of issue to redemption; or
(B) One-fourth of one percent.
(ii) There shall be deducted from the redemption proceeds, if necessary, any
overpayment of interest resulting from previous payments made at a higher rate
based on the original longer period to maturity.
(b) [Reserved]