SLGS (State and Local Government Series): What They Are and When an Issuer Uses Them

SLGS (State and Local Government Series) securities are non-marketable Treasury securities Treasury offers to issuers of tax-advantaged bonds, bought only with an eligible source of funds, used when a yield-restricted fund needs a maturity matched to a known spending date at a rate formula Treasury sets.

Alongside guaranteed investment contracts, repurchase agreements and structured Treasury portfolios, they are one of the investment types covered under what bond proceeds can be invested in.

What are SLGS and who can buy them?

SLGS are non-marketable Treasury securities that 31 CFR 344.0(a) says Treasury offers "to provide issuers of tax-advantaged bonds with investments from any eligible source of funds," and the offering continues until the Secretary terminates it.

Treasury established the program in 1972 following 1969 federal legislation that restricted state and local governments from earning arbitrage profits on bond proceeds (TreasuryDirect).

31 CFR 344.1 limits purchases to an "eligible source of funds," defined in five categories.

• Gross proceeds of tax-advantaged bonds, or amounts reasonably expected to become gross proceeds.
• Amounts released from gross-proceeds status by the universal cap in Treasury Regulation §1.148-6(b)(2).
• Amounts held together with gross proceeds in a refunding escrow, defeasance escrow, parity debt service reserve fund or commingled fund.
• Proceeds of a non-tax-advantaged issue that refunds, or is refunded by, a tax-advantaged issue.
• Other amounts subject to yield limits under the arbitrage rules.

For SLGS purposes "issuer" includes a conduit borrower, and "tax-advantaged bond" takes its meaning from Treasury Regulation §1.150-1(b), covering tax-exempt bonds and certain tax-credit and direct-pay bonds (31 CFR 344.1).

Whether a particular fund qualifies as an eligible source of funds is a conclusion for bond counsel, and the subscription carries certifications to Treasury, including one that tells Treasury if eligibility ends (31 CFR 344.2(e)).

The MSRB's educational glossary captures the market use: SLGS "are most commonly used for deposit in an escrow account in connection with the issuance of refunding bonds."

Time deposit vs demand deposit SLGS

31 CFR 344.0(b) splits the program into Time Deposit securities, issued as certificates of indebtedness, notes or bonds, and Demand Deposit securities, issued as certificates of indebtedness.

Terms run by type: non-interest-bearing certificates of indebtedness run 15 days to one year, interest-bearing certificates run 30 days to one year, notes run one year and one day to 10 years, and bonds run 10 years and one day to 40 years (31 CFR 344.4(a)).

The minimum purchase is $1,000, with Time Deposits in whole-dollar amounts above that, Demand Deposits in any increment and no maximum per TreasuryDirect (31 CFR 344.0(c)).

Certificates of indebtedness pay interest, computed on an annual basis, at maturity with the principal, while notes and bonds pay semiannually and the final interest date must coincide with maturity (31 CFR 344.4(c)).

Demand Deposits are one-day certificates that roll over automatically each day until the holder requests redemption, priced off the average yield of the most recent 13-week Treasury bill auction as adjusted for an estimated marginal tax rate of tax-exempt bond buyers and Treasury administrative costs (31 CFR 344.7(a)).

Redemption notice scales with size: one business day for $10 million or less, three business days for over $10 million and under $500 million, and five business days for $500 million or more, thresholds that since the 2024 rule are measured on an owner's total redemptions (31 CFR 344.9(a)).

Redeeming a Time Deposit early

Early redemption is bounded: a note or bond can be redeemed no earlier than 30 days after issue and any request within 14 days of issue is rejected, certificates of 30 days or more no sooner than 25 days, zero-percent certificates of 16 to 29 days no sooner than 15 days, and the request must reach Treasury between 14 and 60 days before the redemption date (31 CFR 344.6(a), (c)).

For subscriptions on or after October 28, 1996, the value is set by formula: the remaining interest and principal payments are discounted at the current Treasury borrowing rate for the remaining term, which may produce a premium or discount to the issuer, and the redemption certification bars reinvesting the proceeds above the yield used to price it (31 CFR 344.6(d); 344.2(e)(2)(ii)).

How are SLGS rates set?

The SLGS rate is the current Treasury borrowing rate less one basis point, and if that result would be negative the rate is set at zero (31 CFR 344.1).

Treasury determines the current Treasury borrowing rate and may use proxies for maturities it does not issue, so the SLGS rate is a regulated formula rather than a published market yield.

Treasury's 2024 final rule says maximum SLGS rates have been set at the current Treasury borrowing rate less one basis point since 2005.

• Treasury publishes the daily SLGS rate table by 10 a.m. Eastern each business day, with maturities from one month to 40 years.
• Any rate from 0% up to the maximum may be designated, and if the security's life falls between two table increments the shorter term's rate applies; TreasuryDirect's example prices a 65-day security off the two-month row.
• The table in effect on the business day the subscription process starts is the one that applies to that subscription (31 CFR 344.4(b)(1)-(2)).
• If the table is not available by 11 a.m. ET, the prior business day's table governs.

mGIC's SLGS rate table page walks through the rows, and the daily rate-update emails link the table each business day.

How does a SLGS subscription work?

SLGS transactions generally run through SLGSafe, Treasury's online subscription system, and the rule lists underwriters, financial advisors and bond counsel among its potential users (31 CFR 344.3(b), (d), (g)).

Changes are bounded: the principal of any single security cannot move by more than 10%, maturities cannot move by more than 30 days for certificates, six months for notes or one year for bonds, and the issue date cannot move except up to 7 days later for unforeseen circumstances beyond the issuer's control (31 CFR 344.5(d)-(f)).

Cancellation is not automatic: 31 CFR 344.5(c) permits it only if the subscriber establishes to Treasury's satisfaction that the cancellation is required for reasons unrelated to using the program to create a cost-free option.

Using the SLGS program to create a cost-free option, a provision used to exploit interest-rate movements, is an impermissible transaction under 31 CFR 344.2(f), which lists seven examples; Treasury may revoke issuance and declare a subscriber ineligible (31 CFR 344.2(m)(4)).

Each subscription carries certifications under 31 CFR 344.2(e): yield certifications, a duration certification that the term is no longer than reasonably necessary for the governmental purpose, an eligibility certification if eligibility ends, and an agent certification where a bank or other agent subscribes.

A subscriber that misses settlement becomes ineligible to subscribe for six months; if Treasury accepts a late settlement it waives the penalty but charges the interest that would have accrued plus a $100 fee per subscription (31 CFR 344.2(g)-(h)).

Several of these mechanics were added or changed by Treasury's 2024 final rule, published March 4, 2024 (89 FR 15440) and effective August 26, 2024, which applies only to subscriptions started on or after that date.

Treasury proposed cutting the lead time to 45 days in 2022 and kept 60 days after comment.

TreasuryDirect's change summary requires a Yes/No EMMA registration designation matching the EMMA Issue Description.

What happens when the debt limit closes the SLGS window?

The SLGS regulation reserves Treasury's right to change or suspend the offering whenever the Secretary determines that issuing enough obligations to conduct the government's orderly financing operations would exceed the statutory debt limit (31 CFR 344.2(l)).

SLGS count against the debt limit, and Treasury lists suspending their sale among its debt-limit extraordinary measures: Secretary Yellen's May 1, 2023 letter to Congress announced that Treasury was suspending SLGS issuance (Treasury press release).

Treasury's January 17, 2025 description of the extraordinary measures lists the suspension again, noting that SLGS issuance had averaged about $10 billion per month, that no statute requires Treasury to issue SLGS, and that suspension conserves borrowing headroom rather than freeing it.

The Congressional Research Service counts suspension of State and Local Government Securities among the extraordinary measures used in 2021, 2023 and 2025, and estimates the suspensions prevented debt increases of about $10 billion a month in 2021, $6 billion a month in 2023 and $10 billion a month in 2025.

On July 4, 2025, P.L. 119-21 raised the debt limit by $5.0 trillion, to $41.1 trillion (CRS).

While a suspension runs, Treasury may move unredeemed Demand Deposits into special 90-day certificates of indebtedness earning simple interest at the daily factor in effect when Demand Deposit issuance stopped, rolling over if the contingency continues (31 CFR 344.7(b)).

The tax rules anticipate the disruption: when Treasury has suspended SLGS sales on the date an issuer agrees to buy investments, Treasury Regulation §1.148-5(c)(3)(viii) makes those investments eligible for yield reduction payments and §1.148-5(d)(6)(iii)(C)(2)(iii) drops the bidding safe harbor's lowest-cost-versus-SLGS comparison.

SLGS vs open-market securities

Valuation follows a set rule: Treasury Regulation §1.148-5(d)(6)(i) treats the fair market value of a Treasury obligation bought directly from Treasury, including a SLGS, as its purchase price on the purchase date and its redemption price on later dates.

Liquidity runs the other way: a SLGS cannot be sold, exchanged, assigned or pledged, and Treasury cannot call it before maturity (31 CFR 344.2(d), (o)).

The bidding safe harbor in Treas. Reg. §1.148-5(d)(6)(iii) treats the purchase price of a GIC, or of an investment for a yield-restricted defeasance escrow, as fair market value if all its requirements are met, and its winning-bid rules in §1.148-5(d)(6)(iii)(C) call for the highest-yielding bona fide bid net of any broker's fees for a GIC, and for other investments such as escrow securities the lowest-cost bona fide bid including broker's fees and no more than the cost of the most efficient all-SLGS portfolio when bids are due.

The fuller side-by-side is on SLGS vs open-market escrow, and matching securities to a defeasance schedule is covered in the refunding escrow guide.

The IRS's VCAP standards for tax-exempt bonds list as an identified violation an escrow party failing to reinvest refunding proceeds when investments mature, for example failing to reinvest the proceeds of a matured GIC in Zero Percent Time Deposit SLGS (IRM 7.2.3.4.3).

Where an issue needs a bid GIC or open-market escrow securities rather than a pure SLGS portfolio, an independent Bidding Agent can run the solicitation and the cost comparison, and issuers can ask mGIC about it through a free, no-obligation review.

Final determinations about whether a fund is an eligible source of funds, and how the arbitrage and safe harbor rules apply to a given issue, belong to bond counsel and tax counsel.

Last updated 2026-10-06.

This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.