# What are composite rates?
**AGENCY:**
Bureau of the Public Debt, Fiscal Service, Treasury.
**ACTION:**
Final rule.
**SUMMARY:**
A Series I savings bond accrues interest based on both a fixed rate of return and a semiannual inflation rate. A single, annual interest rate called the composite rate reflects the combined effects of the fixed rate and the semiannual inflation rate. This amendment clarifies that the fixed rate of return and the composite rate will always be greater than or equal to 0%. This amendment is for clarification purposes only and makes no substantive change to the existing regulations.
**DATES:**
Effective: November 4, 2008.
**ADDRESSES:**
You can download this final rule at the following Internet addresses: *http://www.publicdebt.treas.gov* or *http://www.gpoaccess.gov/ecfr.*
**FOR FURTHER INFORMATION CONTACT:**
Karthik Ramanathan, Director, Office of Debt Management, Domestic Finance, Departmental Offices, Department of the Treasury, at (202) 622-2042 or *[email protected].*
Elisha Whipkey, Director, Division of Program Administration, Office of Retail Securities, Bureau of the Public Debt, at (304) 480-6319 or *[email protected].*
Dean Adams, Attorney-Adviser, Edward Gronseth, Deputy Chief Counsel, Office of the Chief Counsel, Bureau of the Public Debt, at (304) 480-8692 or *[email protected].*
**SUPPLEMENTARY INFORMATION:**
A Series I savings bond accrues interest based on both a fixed rate of return and a semiannual inflation rate. The Secretary of the Treasury determines the fixed rate of return. The fixed rate is established for the life of the bond. This amendment clarifies that the fixed rate of return will always be greater than or equal to 0%. The Department of the Treasury issues these regulations pursuant to the authority contained in 5 U.S.C. 301 and 31 U.S.C. 3105.
The composite rate is a single, annual interest rate that reflects the combined effects of the fixed rate and the semiannual inflation rate. The composite rate could possibly be less than the fixed rate in deflationary situations. This amendment clarifies that the composite rate will always be greater than or equal to 0%.
This amendment makes no substantive change to the regulations but will benefit investors by clarifying that neither the fixed rate of return nor the composite rate will be negative under any market conditions.
**Procedural Requirements:**
This final rule does not meet the criteria for a “significant regulatory action” as defined in Executive Order 12866. Therefore, a regulatory assessment is not required.
Because this final rule relates to matters of public contract and procedures for United States securities, notice and public procedure and delayed effective date requirements are inapplicable, pursuant to 5 U.S.C. 553(a)(2).
As no notice of proposed rulemaking is required, the Regulatory Flexibility Act (5 U.S.C. 601 *et seq.* ) does not apply.
We ask for no new collections of information in this final rule. Therefore, the Paperwork Reduction Act (44 U.S.C. 3507) does not apply.
**List of Subjects in 31 CFR Part 359**
Bonds, Federal Reserve system, Government securities, Securities.
**31 CFR Part 359**
Accordingly, for the reasons set out in the preamble, 31 CFR Chapter II, Subchapter B, is amended as follows:
**PART 359—OFFERING OF UNITED STATES SAVINGS BONDS, SERIES I**
1. The authority citation for part 359 continues to read as follows:
**Authority:**
5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.
**31 CFR Part 359**
2. Revise § 359.10 to read as follows:
§ 359.10
The Secretary, or the Secretary's designee, determines the fixed rate of return. The fixed rate is established for the life of the bond. The fixed rate will always be greater than or equal to 0.00%. [^1] The most recently announced fixed rate is only for bonds purchased during the six months following the announcement, or for any other period of time announced by the Secretary.
[^1] However, the fixed rate is not a guaranteed minimum rate. The composite rate is composed of both the fixed rate and a semiannual inflation rate, which could possibly be less than the fixed rate or negative in deflationary situations. In all cases, however, the composite rate will always be greater than or equal to 0.00%.
**31 CFR Part 359**
3. Revise § 359.13 to read as follows:
§ 359.13
Composite rates are single, annual interest rates that reflect the combined effects of the fixed rate and the semiannual inflation rate. The composite rate will always be greater than or equal to 0.00%.
Dated: October 28, 2008.
Kenneth E. Carfine,
Fiscal Assistant Secretary.