By: Kade Boone
New 2016 Treasury Regulations
Recent regulation updates have changed treasury arbitrage regulations on bonds for the first time since August 16, 1993.
Traditionally, when determining the call date for bonds that are subject to redemption under 26 CFR §1.148-4(b)(3), the call date for arbitrage yield is the call date for each maturity that produced the lowest yield on the entire issue.
As of October 17, 2016, bonds are no longer called to produce lowest yield on the entire issue. Now, the call date for arbitrage yield is the call date of each maturity that produces the lowest yield of that maturity, not the issue. The regulation determines that the yield on a single bond includes its principal, interest, and costs that are associated with a “qualified guarantee”. Those costs can include bond insurance, surety bond premiums, and letter of credit fees.
With DBC Finance from SS&C, you can navigate these changes seamlessly. DBC Finance automatically calculates (by default) the accurate treasury regulations based on the delivery date input of the issue.
For complete and final regulations details, visit the U.S. Government Publishing Office (GPO).