Consumer Price Index (CPI) Coupon Linked Instruments (effective September 30, 2004)
Effective September 30, 2004. Final treatment for Consumer Price Index (CPI) Coupon Linked Instruments effective with the 3Q04 capital classification.
The rule currently lacks the ability to accommodate floating-rate instruments that reset in response to changes in the consumer price index (CPI) as published by the Bureau of Labor Statistics. GSE issuance of CPI-linked instruments is tied to swap market transactions intended to create desired synthetic debt structure and terms. In such cases, the true economic position nets to the payment terms of the related derivative contract. Accordingly, in order to accommodate and address the existence of CPI-linked instruments in GSE portfolios, OFHEO directs that the net synthetic position be evaluated in the RBC stress test model. That is, for CPI-linked instruments tied to swap transactions that are formally linked in a hedge accounting relationship, the GSE should substitute the CPI-linked instrument's coupon payment terms with those of the related swap contract.