Pending FRB Treasury Bond Policy | F-002

[DonTrillions]

Category: Fiscal Policy
Affected Parties: General Public, Financial Institutions (FIs), FRB Treasury & Operations Divisions
Minting Required: N
Estimated Cost: N/A
Legal Basis: Federal Reserve Act (FRA) §§ 4, 5, 6, 8, 9 & 11​

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1 Purpose​

This Policy establishes the FRB Treasury Bond (“T-Bond”) Program, enabling the Federal Reserve Bank of Redmont (FRB) to issue medium-term, fixed-rate, fully redeemable securities.
T-Bonds provide an accessible, low-risk savings instrument for the public while expanding FRB liquidity tools and supporting long-term monetary stability.

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2 Objectives​

• Offer the public and institutions a stable, FRB-backed investment vehicle.
• Deepen domestic capital-market activity beyond short-term T-Bills.
• Support controlled monetary expansion and liquidity management.
• Provide predictable income through monthly coupon payments.
• Maintain transparency and compliance under FRA oversight standards.

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3 Instrument Design​

Element	Specification
Issuer	Federal Reserve Bank of Redmont
Instrument Type	Fixed-rate Treasury Bond
Tenor (Maturity)	Minimum 3 months – Maximum 12 months
Coupon Rate Basis	Fixed rate set by the Board at issue, referenced to the prevailing FRB Discount Rate (M-001) plus or minus a policy spread
Interest Payment	Monthly coupon credited automatically to holder’s ledger account
Redemption	Principal repaid in full at maturity
Denomination	Minimum R$ 10 000
Issue Format	Dematerialized (electronic ledger record)
Currency	Redmont Dollar (R$)
Transferability	Freely tradable on the FRB ledger between eligible holders
Collateral Status	Recognized as eligible collateral under Reserve Policy R-001 §4 (4)

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4 Issuance and Eligibility​

Eligibility: All individuals and entities registered within the Commonwealth may purchase T-Bonds through approved channels.
Distribution Channels:

1. Direct subscription via the FRB Treasury Dashboard.
2. Through licensed Financial Institutions acting as authorized dealers.
   Settlement: T + 10 via verified FRB ledger balances; off-ledger or unverified funds are not accepted.
   Allocation: Bonds are issued at par or discount according to market conditions set by Board motion.
   Redemption: Automatic credit of principal to registered accounts on maturity date.

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5 Liquidity and Compliance Safeguards​

• Reserve Integrity: FI purchases must not reduce their Reserve Ratio below the minimum required by Policy R-001.
• Verified Funding: All subscriptions cross-checked against real Reserve balances.
• Ledger Transparency: Every transfer or resale must be recorded on the FRB ledger.
• No Leverage or Derivatives: T-Bonds may not be used to create synthetic or leveraged positions.
• Audit Trail: All auctions, settlements and coupon disbursements are logged for Inspector-General oversight (FRA § 8 (10)–(13)).

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6 Interest and Payment Mechanism​

(a) Interest accrues daily and is paid monthly to the bondholder’s registered account.
(b) The coupon rate is fixed for each issue and published in the FRB Gazette.
(c) Interest payments are funded from verified FRB operating balances and reported in the Monthly FRB Report (FRA § 8 (1)).
(d) Missed or delayed coupon payments must be disclosed publicly within 48 hours.

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7 Trading and Market Conduct​

• T-Bonds are freely tradable prior to maturity on the official FRB ledger.
• Dealers may charge a nominal service fee but no yield markup beyond FRB-approved limits.
• All secondary sales must settle through the FRB system to preserve monetary neutrality.
• Speculative activity or off-ledger resales constitute misconduct under FRA § 8.

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8 Systemic Benefits​

• Encourages domestic savings and financial participation.
• Provides the FRB with a non-inflationary funding mechanism.
• Strengthens liquidity management and yield-curve formation.
• Enhances public confidence in the national financial system.

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9 Redundancy and Safeguards​

• All T-Bonds are fully backed and guaranteed by the FRB.
• Redemption risk is null; default requires explicit Congressional override (FRA § 9).
• Issuance draws from verified FRB reserves; no minting authority is required.
• Dual-record ledger structure ensures each bond’s origin, transfer and redemption are auditable.

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10 Implementation Roadmap​

1. Authorization: Full Board motion approval required.
2. System Setup: Integration of bond modules within the FRB Treasury Dashboard.
3. Public Announcement: Issue schedule and coupon rates published in the FRB Gazette.
4. Pilot Issuance: Initial tranche limited to R$ 10 million to test market demand.
5. Full Rollout: Expansion subject to Inspector-General verification and Board review.

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11 Policy Oversight and Review​

Authority: Federal Reserve Board (FRA § 5).
Voting: Majority of Sitting Members; DOC Secretary votes only to break ties.
Review Cycle: Quarterly review of coupon rates, maturity mix and systemic impact.
Transparency: Aggregate issuances and interest expenses published in monthly reports.
Continuity: Remains in force under FRA § 11 until repealed or superseded.