The U.S. Savings Bonds are treasury securities that are offered to the individual investors. The U.S. Government issues the U.S. Savings Bonds in the form of a non-callable and certified bond and the holders of U.S. Savings Bonds are endorsed by the good trust and credit of the federal government. One out of six Americans has collectively invested in savings bonds. This amounts to greater than 50 million people in the United States. Nevertheless, the entire investment in savings bond accounts for a small segment of the public debt in the United States.
Conventionally, the savings bonds were issued in the form of classical paper notes or paper bonds. From the month of October 2002, the Department of Treasury in the United States also started to issue book or electronic savings bonds by TreasuryDirect, which is an online service provided by the Department of Treasury. Till the year 2004, approximately one fourth of investments in fresh savings bonds have been done by electronic means. The savings bonds do not have any functional secondary market for trading. However, transfer of savings bonds may be performed in case the outstanding taxes on the accumulated interest are paid off.
The savings bonds in the United States can be held for a minimum period of one year and after this is completed, they can be paid off by the Department of Treasury at any moment. So they carry a moderate degree of liquidity. As savings bonds are forms of registered securities, there is no legal effect for the ownership of a savings bond. The ownership is ascertained according to the names that are present in the documents of the Department of Treasury and these are impressed on the savings paper bonds. As a result, the savings bonds are replaceable in case they are damaged or misplaced.
There are no coupon rates for savings bonds. The payments of interests are accumulated or added together. This suggests that they are combined with the bond's value and this is received by the bondholder at the time when the bond is redeemed. Savings bonds are not similar to the other types of treasury securities in that there is no mandatory requirement for the earnings from the payment of interest to be filed with the Internal Revenue Service (IRS) unless the bonds are paid off. For this reason, savings bonds are regarded as tax-deferred investments.
If there is redemption of savings bonds before five years, then the interest for the latest three months is confiscated.
The United States Savings Bond can be categorized into the following types:
- A Bond
- B Bond
- C Bond
- D Bond
- E Bond
- EE Bond
- HH Bond
- I Bond
- Patriot Bonds
