State and local government series

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State and local government series (SLUGs)

Special nonmarketable certificates, notes, and bonds offered to state and local governments as a means to invest proceeds from their own tax-exempt financing. Interest rates and maturities comply with IRS arbitrage provisions. Slugs are offered in both time deposit and demand deposit forms. Time deposit certificates have maturities of up to one year. Notes mature in one to ten years and bonds mature in more than ten years. Demand deposit securities are one-day certificates rolled over with a rate adjustment daily.

State and Local Government Series

Non-negotiable securities the Federal government sells to state and local governments. SLGS are an investment vehicle for issuers of state and local debt securities in which they may invest the proceeds from such issues. SLGS may have time deposits or demand deposits. Time deposit SLGS have maturities of anywhere from 15 days to 40 years and have interest rates one basis point below Treasury securities with similar maturities. Demand deposit SLGS have one-day maturities that are automatically rolled over until the security holder withdraws the deposit; their interest rates are based on the most recent auction of 13-week Treasury securities.
References in periodicals archive ?
The SLGS program are a special series of Treasury securities that were created more than 20 years ago to help cities have an investment option for proceeds from the sale of municipal tax exempt bonds and notes before they are spent for construction or other purposes to ensure compliance with the Internal Revenue Service's (IRS) arbitrage rules.
By investing proceeds in SLGS, cities are guaranteed there will be no arbitrage problem--avoiding the need to hire outside investment advisors and attorneys to ensure compliance.
NLC and others have been working with the Treasury for years in an effort to make the SLGS a more attractive alternative.
The government publishes maximum SLGS rates each day and permits the issuer to subscribe for SLGS for the amounts and maturity dates required at a rate up to the maximum rate.
Because of the economy and flexibility that SLGS offer, SLGS are typically the preferred escrow investment strategy in instances where the SLGS rates will permit the escrow to be invested at a rate equal to the bond yield.
However, even if open market rates are higher than SLGS rates, it may not be possible to purchase open market securities in the amounts, dates and rates required without creating inefficiency in the escrow account.
By the final four years of the cash flow, Fitch anticipates that a significant amount of the escrow receipts from SLGS will have matured.