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2005 Rate Reset Sample Calculations

1998 Series D “TVC”

The coupon rate on the 1998 Series D PARRS may be reset downward, under certain conditions, on June 1 of each year. The coupon rate will be reset if the average of the sums of the U.S. Treasury’s 20-Year CMT rate plus an extrapolation factor for each day of the week ending the last Friday in April, plus 0.94% (94 basis points), is less than the current coupon rate.

Example:

2005 Reset Calculation for TVC

Date Treasury 20-yr CMT (1) Extrapolation Factor
04/25/2005 4.65% -0.11%
04/26/2005 4.67% -0.08%
04/27/2005 4.65% -0.08%
04/28/2005 4.60%

-0.08%

04/29/2005 4.61% -0.08%    

Average 4.64%             + -0.09% = 4.550%
+94 basis points (2): 0.940%
=calculated rate (3): 5.490%
current rate: 5.952%
(1) Per 1998 Series D Offering Circular, and 1998 Series D Legal Notice
(2) Per 1998 Series D Offering Circular (C-9)
(3) Coupon rate will reset if Calculated Rate is below the Current Rate.

1999 Series A “TVE”

The coupon rate on the 1999 Series A PARRS may be reset downward, under certain conditions, on May 1 of each year. The coupon rate will be reset if the average of the sums of the U.S. Treasury’s 20-Year CMT rate plus an extrapolation factor for each day of the week ending the last Friday in March, plus 0.84% (84 basis points), is less than the current coupon rate.

Example:

2005 Reset Calculation for TVE

Date Treasury 20-yr CMT (1) Extrapolation Factor
3/21/05 4.94% -0.09%
3/22/05 5.01% -0.13%
3/23/05 4.99% -0.13%
3/24/05 4.97%

-0.13%

3/25/05 no data published due to holiday    

Average 4.980%             + -0.12% = 4.858%
+84 basis points (2): 0.840%
=calculated rate (3): 5.698%
current rate: 5.618%
(1) Per 1999 Series A Offering Circular, and 1999 Series A Legal Notice
(2) Per 1999 Series A Offering Circular (C-9)
(3) If the calculated rate is higher than the current coupon rate, no reset will occur

 

From the U.S. Treasury's Web site:

Treasury Long-Term Average Rate and Extrapolation Factors. Beginning 02/18/02, Treasury ceased publication of the 30-year constant maturity series. Instead, from 02/19/02 through 05/28/04, Treasury published a Long-Term Average Rate, "LT>25," (not to be confused with the Long-Term Composite Rate, definitions below). In addition, Treasury published daily linear extrapolation factors that could be added to the Long-Term Average Rate to allow interested parties to compute an estimated 30-year rate. On June 1, 2004, Treasury discontinued the "LT>25" average due to a dearth of eligible bonds. In place of the "LT>25" average, Treasury will now publish the Treasury 20-year Constant Maturity rate on this page. The extrapolation factor shown in the 3rd column can be added to the 20-year Constant Maturity to obtain an estimate for a theoretical 30-year rate.

The Long-Term Average Rate, "LT>25," was the arithmetic average of the bid yields on all outstanding fixed-coupon securities (i.e., excluding Inflation-Indexed securities) with 25 years or more remaining to maturity. This series first appeared on 2/19/02, following discontinuation of the 30-year Treasury constant maturity series. Subsequently, the "LT>25" average was discontinued on June 1, 2004.

Linear Extrapolation Factors are determined by considering the slope of the yield curve at it's long end and extrapolating out to a theoretical 30-year point. To use the Extrapolation Factor to determine a 30-year proxy rate, simply add the factor to the 20-year Constant Maturity Rate. For example, if on a particular day the 20-year Constant Maturity is 5.40% and the Extrapolation Factor is 0.02%, then a 30-year theoretical rate would be 5.40% + 0.02% = 5.42%.

For more information regarding these statistics contact the Office of Market Finance (202) 622-1876. For other Public Debt information contact (202) 219-3350.

Source: U.S. Treasury Web site

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