Statement Concerning Bureau of Labor Statistics Announcement Changing CPI Precision and Treasury Inflation Indexed Securities

FOR RELEASE AT 8:35 AM EST

August 16, 2006

The increase in the published precision of the U.S. City Average All Items Consumer Price Index for All Urban Consumers, not seasonally adjusted (CPI-U NSA), to three decimal places, announced today by the Department of Labor's Bureau of Labor Statistics (BLS), will require no methodological change in the calculation of daily Index Ratios of Treasury Inflation Protected Securities (TIPS) or future inflation adjustments of Series I Savings Bonds.

The change in the precision of the published CPI-U NSA does not affect the price of any existing Treasury security. The increase in the number of decimal places to which the CPI-U NSA is reported does not alter the methodology of the calculation of daily Index Ratios for TIPS, which are multiplied by the TIPS' real principal value to calculate the inflation-adjusted value of the TIPS' principal. Nor does this change affect the inflation adjustment of Series I Savings Bonds, which is expressed as a semi-annual rate and reflects the percentage change in the CPI-U NSA over a six-month period. This change in CPI reporting will merely enhance the accuracy of the inflation adjustment calculations.

Under the regulations governing TIPS and Series I Savings Bonds, the CPI-U NSA is the monthly index published by the BLS (without regard to the number of decimal places) used to calculate inflation adjustments. Thus, beginning with the January 2007 CPI (to be released in February 2007), Treasury will use the CPI-U NSA, as reported by BLS to three decimal places, in the calculation of inflation adjustments for these securities. For more information on the calculation of the inflation adjustment for TIPS and Series I Savings Bonds, see 31 CFR Part 356 and 31 CFR Part 359, respectively.

PA-739