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Daily archives "August 21, 2017"

What Happened to US Savings Bonds?

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There was a moment when billions of dollars in U.S. savings bonds were given for weddings, graduations, birthdays, or just because. Those days are over. After selling billions of dollars of saving bonds every year, the Treasury is selling less than $50 million right now.

An older style EE Bond

What happened to U.S. Savings bonds? The government messed with the interest rate formula, making them unattractive as an investment by fixing rates for the lifetime of the savings bond. Then in ‘12, the government no longer offered paper savings bonds, eliminating their attractiveness as gifts. Furthermore, the Treasury no longer marketed savings bonds, probably due to the fact that the government was getting a big debt by overspending. They didn’t want to bring attention to the fact that it needed to borrow money.

U.S. Savings bonds have had a long and detailed history, beginning with Series A-D bonds, provided in the depression to offer folks an enticement to save correctly. The Series E bond was started in April of 1941 by as a way of financing World War II. These bonds, offered as an American investment, had an initial 10-year maturity and were offered at a reduction of face value. They had an interest rate of 2.9%. During the war, over $35 billion worth of saving bonds were sold to the public, in amounts as small as $25.

When Series EE bonds were a Great Deal

Saving bonds were introduced in the early ‘80s. This was a period of rising interest rates, making buying them more striking. These saving bonds had a lifetime, fixed base rate that was put in place every six months for all bonds sold during that time.   The bonds had a “floating rate” portion of the interest, which altered every six months to stay with the established rate on Treasury notes.