Demand Deposit securities are one-day certificates of indebtedness that are automatically rolled over each day until you request redemption.

(a) How is the rate for Demand Deposit securities determined? Each security shall bear a rate of interest based on an adjustment of the average yield for 13-week Treasury bills at the most recent auction. A new annualized effective Demand Deposit rate and daily factor for the Demand Deposit rate are effective on the first business day following the regular auction of 13-week Treasury bills and are shown in the SLGS rate table. Interest is accrued and added to the principal daily. Interest is computed on the balance of the principal, plus interest accrued through the preceding day.

(1) How is the interest rate calculated? (i) First, you calculate the annualized effective Demand Deposit rate in decimals, designated “I” in Equation 1, as follows:

$$ (Equation 1) Where: I = Annualized effective Demand Deposit rate in decimals. If the rate is determined to be negative, such rate will be reset to zero. P = Average auction price for the most recently auctioned 13-week Treasury bill, per hundred, to six decimals. Y = 365 (if the year following issue date of the 13-week Treasury bill does not contain a leap year day) or 366 (if the year following issue date of the 13-week Treasury bill does contain a leap year day). DTM = The number of days from date of issue to maturity for the most recently auctioned 13-week Treasury bill. MTR = Estimated marginal tax rate, in decimals, of purchasers of tax-exempt bonds. TAC = Treasury administrative costs, in decimals.

(ii) Then, you calculate the daily factor for the Demand Deposit rate as follows:

DDR = (1 + I)1/Y −1 (Equation 2)

(2) Where can I find additional information? Information on the estimated average marginal tax rate and Treasury administrative costs for administering Demand Deposit securities, both to be determined by Treasury from time to time, will be published in the Federal Register.

(b) What happens to Demand Deposit securities during a debt limit contingency? At any time the Secretary determines that issuance of obligations sufficient to conduct the orderly financing operations of the United States cannot be made without exceeding the statutory debt limit, we may invest any unredeemed Demand Deposit securities in special 90-day certificates of indebtedness.

(1) Funds left invested in Demand Deposit securities remain subject to the normal terms and conditions for such securities as set forth in this part.

(2) Funds invested in 90-day certificates of indebtedness earn simple interest equal to the daily factor in effect at the time Demand Deposit security issuance is suspended, multiplied by the number of days outstanding. Ninety-day certificates of indebtedness are subject to the same request for redemption notification requirements as those for Demand Deposit securities and will be redeemed at par value plus accrued interest. If a 90-day certificate of indebtedness reaches maturity during a debt limit contingency, we will automatically roll it into a new 90-day certificate of indebtedness, along with accrued interest, that earns simple interest equal to the daily factor in effect at the time that the new 90-day certificate of indebtedness is issued, multiplied by the number of days outstanding. When regular Treasury borrowing operations resume, the 90-day certificates of indebtedness, along with accrued interest, will be reinvested in Demand Deposit securities.

[70 FR 37911, June 30, 2005, as amended at 77 FR 33635, June 7, 2012; 89 FR 15449, Mar. 4, 2024]

(a) When is my subscription due? The subscriber must set the issue date in the subscription. You cannot change the issue date to require issuance earlier or later than the issue date originally specified; provided, however, you may change the issue date up to 7 days after the original issue date if you establish to the satisfaction of Treasury that such change is required as a result of circumstances that were unforeseen at the time of the subscription and are beyond the issuer's control (for example, a natural disaster). The issue date must be a business day. The issue date cannot be more than 60 days after the date we receive the subscription. If the subscription is for $10 million or less, we must receive the subscription at least 5 days before the issue date. If the subscription is for more than $10 million, we must receive the subscription at least 7 days before the issue date.

(b) How do I start the subscription process? A subscriber starts the subscription process by entering into SLGSafe the following information:

(1) The issue date;

(2) The total principal amount;

(3) The issuer's name and Taxpayer Identification Number;

(4) A description of the tax-advantaged bond issue; and

(5) The certifications required by § 344.2(e)(1), if the subscription is submitted by an agent of the issuer.

(c) Under what circumstances can I cancel a subscription? You cannot cancel a subscription unless you establish, to the satisfaction of Treasury, that the cancellation is required for reasons unrelated to the use of the SLGS program to create a cost-free option.

(d) How do I change a subscription? You can change a subscription on or before 3 p.m., Eastern time, on the issue date. You may change the aggregate principal amount specified in the subscription by no more than ten percent, above or below the amount originally specified in the subscription.

(e) How do I complete the subscription process? The completed subscription must:

(1) Be dated and submitted electronically by an official authorized to make the purchase;

(2) Describe the bond issue. If the tax-advantaged bond issue referenced in paragraph (b)(4) of this section is, or will be, registered or disclosed in the Municipal Securities Rulemaking Board's (MSRB) Electronic Municipal Market Access (EMMA®) system, describe the issue exactly as designated in the “issue description” field of EMMA®, or successor system;

(3) Include the issuer's address;

(4) Include the information on the financial institution that will transmit the funds for the purchase of the securities;

(5) Not be more than ten percent above or below the aggregate principal amount originally specified in the subscription;

(6) Include the information required under paragraph (b) of this section, if not already provided; and

(7) Include the certifications required by § 344.2(e)(1) (agent certification), (e)(2)(i) (yield certification), and (e)(4) (eligibility certification).

[70 FR 37911, June 30, 2005, as amended at 89 FR 15450, Mar. 4, 2024]

(a) When must I notify Treasury to redeem a security? Demand Deposit securities can be redeemed at the owner's option, if we receive a request for redemption not less than:

(1) One business day before the requested redemption date for total redemptions by an owner of $10 million or less;

(2) Three business days before the requested redemption date for total redemptions by an owner of more than $10 million but less than $500 million; and

(3) Five business days before the requested redemption date for total redemptions by an owner of $500 million or more.

(b) Can I request partial redemption of a security balance? You may request partial redemptions in any amount. If your account balance is less than $1,000, it must be redeemed in total.

(c) Do I have to submit a request for redemption? Yes. An official authorized to redeem the securities must submit an electronic request through SLGSafe. The request must show the Taxpayer Identification Number of the issuer, the security number, and the dollar amount of the securities to be redeemed. Fiscal Service must receive the request by 3 p.m., Eastern time on the required day. You cannot cancel the request.

[70 FR 37911, June 30, 2005, as amended at 89 FR 15450, Mar. 4, 2024]