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federal

R e s e r v e Ba n k

of

Dallas

DALLAS. TEXAS 75222
Circular No. 79-107
June 25, 1979

PAMPHLETS ON SAVINGS BONDS

TO ALL ISSUING AND PAYING AGENTS OF SAVINGS BONDS
IN THE ELEVENTH FEDERAL RESERVE DISTRICT:
Enclosed are copies of two pamphlets which the Bureau has prepared
to respond to inquiries about the savings bond changes announced in January
and the recently announced rate increase.
The pamphlet entitled, "Information on New Savings Bonds and
Maturities of Outstanding Bonds," contains updated comparison charts as well
as descriptive paragraphs designed to respond to some of the most frequently
asked questions about the new bonds and maturities of the Series E and H.
Several details which have been finalized in the past few weeks are also in­
cluded, namely:
1)

It was previously announced that Series HH bonds purchased
for cash would be subject to an interest adjustment if redeemed
before original maturity. Update: Interest adjustment will only
be made if the bond is redeemed within five years after issue
and the adjustment will reduce the yield of the HH bond to a
level comparable to that of a Series EE bond held for the same
length of time.

2)

It was previously mentioned that there would be some limitations
on the eligibility of Series E and EE bonds for exchange for
Series HH. These limitations will be as follows: Series E bonds
will be eligible until one year after final maturity; Series EE
bonds will be eligible six months after issue.

The second pamphlet, "Questions and Answers About the Improved
Rate on Savings Bonds," is essentially a revised format of the information
which was sent to you earlier with our Circular 79-88, dated May 16, 1979.
Additional copies of this circular are available upon request to
the Fiscal Agency Department of this Bank, Ext. 6364.

FEDERAL RESERVE BANK OF DALLAS
Fiscal Agent of the United States
Enclosures
Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank:
1-800-492-4403 (intrastate) and 1-800-527-4970 (interstate). For calls placed locally, please use 651 plus
the extension referred to above.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

Information on
New Savings Bonds
and
Maturities of Outstanding Bonds

INTRODUCTION

The major changes announced in the savings bond program underline
the Treasury's continued interest in strengthening savings bonds as a
vital part of its debt management operations. Bonds provide the Treasury
with a stable source of funds from millions of citizens, and also provide
Americans at all economic levels with an opportunity to save in a safe
and convenient manner.
Savings bonds are an absolutely secure form of investment. Bonds
that are lo st, stolen, or destroyed will be replaced upon adjudication of a
valid claim. Locations for purchasing and redeeming bonds are readily
accessible throughout the country. The return on savings bonds is guar­
anteed. The reporting of interest on Series E and the new EE bonds can
be deferred, for Federal income tax purposes, until the bonds reach final
maturity, are redeemed, or otherwise disposed of.
The information contained in this report is divided into five major
sections: (I) Series EE, (II) Series HH, (III) Exchange Offering,
(IV) Extensions and M aturities of Series E and H bonds and savings
notes, and (V) Comparison charts of the essential features. We believe
the information furnished will be beneficial in acquainting owners with
the new changes and the status of their present holdings. However, this
report is not intended to substitute for official Treasury regulations and
instructions by which the program is adm inistered.
(I) Series EE
A new accrual type bond called Series EE will be offered for sale
beginning January 2, 1980, and will be available at banks and other
financial institutions qualified as Issuing agents and through payroll
savings plans. The Series E bonds will be withdrawn from sale over-thecounter as of December 31, 1979. Payroll plans will convert to the new
Series EE bonds no later than June 30, 1980. (Please note that unredeemed
Series E bonds will continue to earn interest beyond these dates - see
section IV for further d etails.)
The new Series EE bonds will have a term to maturity of 11 years.
Like the current Series E bonds, however, the EE bond will yield 6 1/2%,
compounded semiannually, if held at least 5 years and will continue to
earn 6 1/2% thereafter. The new EE bond will be eligible for redemption
six months after issue.
The purchase price of a Series EE bond will be one-half the face
value. For example, a purchaser can buy a $50 Series EE bond (the
lowest denomination) for $25. The chart on page 5 provides a comparison
of the terms and conditions of Series E and EE bonds.

-2-

(II) Series HH
Beginning January 2, 1980, a new current income bond called
Series HH will be offered for sale. Series H bonds will be withdrawn
from sale as of December 31 , 1979.
The major difference between Series H and HH bonds will be in the
payment of interest. Series H bonds earn Interest on a graduated scale
which starts at 4.71% and increases to provide an overall yield of 6 1/2%
if held to original maturity (10 years). This graduated scale has generated
many complaints from bondowners concerning the fluctuations in the amounts
of their semiannual interest checks. The new Series HH bonds will pay
interest at a level rate of 6 1/2%. However, bonds purchased for cash
will be paid at less than their face amount if they are redeemed within 5
years after issu e. This interest adjustment will reduce the overall yield
to a level comparable to that of a Series EE bond held for the same length
of time. Bonds purchased on exchange will not be subject to an interest
adjustment for early redemption.
Series HH bonds will be issued only by Federal Reserve Banks or
their Branches and the Bureau of the Public Debt. Applications for
purchase or exchange may be submitted in person or by mail. Most banks
and financial institutions which now issue Series E bonds will a ssist
customers in completing and forwarding Series HH bond applications to the
Federal Reserve Banks.
Please see page 6 for a comparison chart of the terms and conditions
of Series H and HH bonds.
(Ill) Exchange Offering
The Treasury is withdrawing the present Series E for Series H
exchange offering as of December 31, 1979. A new exchange offering
will be introduced on January 2, 1980.
The present offering allows owners to exchange Series E bonds and
savings notes (Freedom Shares) for Series H bonds. The new offering
will permit the exchange of eligible Series E bonds, savings notes and
Series EE bonds for Series HH bonds. To avoid any loss in interest the
Series E bonds being exchanged should be presented before they reach
final maturity. (See section IV for details on maturity dates.) Matured
bonds may still be exchanged, with tax deferral privileges, until one year
after maturity; however, the bonds will not earn any Interest from the time
they mature until the time the exchange is made. Series EE bonds will
not be eligible for exchange until 6 months after issue.

-3 -

The new offering will carry the same tax deferral privilege as the
present offering. At the time of exchange, a bondowner may continue to
defer reporting the interest earned on the exchanged securities, for Federal
income tax purposes, until the Series HH bonds are cashed, finally mature,
or are otherwise disposed of. The amount of the deferred interest will be
shown on the face of the Series HH bond. The interest earned on the
Series HH bonds must be reported each year for Federal income tax purposes.
Series HH bonds issued on exchange will not be subject to an interest
adjustment for early redemption.
A purchaser may use any combination of Series E and EE bonds and
savings notes to purchase Series HH bonds provided all the securities are
still eligible for exchange. The redemption value of the securities being
exchanged must equal at least $500 (the minimum denomination for
Series HH bonds). A bondowner may add cash to the redemption value of
the bonds to reach- the next highest multiple provided he is exchanging
for a denomination higher than $500 and the amount of cash being added
is less than $500.
No offering will be made to permit the exchange of Series H bonds for
new Series HH or the exchange of Series E bonds or savings notes for the
new Series EE bonds.
Please see the chart on page 7 for a comparison of the current and
new exchange offering.
(IV) Extensions and M aturities of
Series E and H Bonds
and Savings Notes
Series E bonds with issue dates from May 1941 through April 1952
will not be extended again. This group of bonds will reach final maturity
exactly 40 years from their respective issue dates and will cease to earn
interest at that time. The accrued interest on an unredeemed Series E bond
is reportable, for Federal income tax purposes, for the year in which the
bond m atures, and must be declared if the bond is not exchanged for current
income bonds. (See section III for further detail on exchanges with tax
deferral privilege.)
Series H bonds with issue dates from June 1952 through May 1959 will
not be extended again. This group of bonds will reach maturity from
February 1982 through May 1989.
An additional 10-year extension will be given to all unredeemed
Series E bonds Issued after April 1952; to all savings notes (Freedom Shares);
and to Series H bonds Issued after May 1959.
Although Series E and H bonds will not be available for purchase after
December 31, 1979, all unredeemed bonds will continue to earn interest until
they reach final maturity. The chart on page 4 provides additional information
concerning extended m aturities.

-4 -

SERIES E E X T E N D E D M A T U R IT IE S
Date of M aturity
(including new extension)

Date of Issue
* May
May
Feb.
June
Dec.
June
Dec.
Jan.

1941 - Apr.
1952 - Jan.
1957 - May
1959 - Nov.
1965 - May
1 9 6 9 - Nov.
1973 - Dec.
1 9 8 0 - June

1952
1957
1959
1965
1969
1973
1979
1980

May
Jan.
Jan.
Mar.
Dec.
Apr.
Dec.
Jan.

1981 1992 1996 1997 1992 1995 19982005-

Apr.
Sept.
Apr.
Aug.
May
Sept.
Dec.
June

1992
1996
1998
2003
1996
1999
2004
2005

Term of Bond
40
39
38
37
27
25
25
25

years
years, 8 mos.
years, 11 mos.
years, 9 mos.
years
years. 10 mos.
years
years (payroll issues only)

SERIES H E X T E N D E D M A T U R IT IE S
Date of Maturity
(including new extension)

Date of Issue
*June
* Feb.
*June

1952 — Jan.
1957 - May
1959 - Dec.

1957
1959
1979

Feb.
Feb.
June

1 9 8 2 - Sept. 1986
1987 r May 1989
1 9 8 9 — Dec. 2009

Term of Bond
29 years,
30 years
30 years

8 mos.

S A VIN G S NOTES E X T E N D E D M A T U R IT IE S
Date of Maturity
(including new extension)

Date of Issue
May

1967 -

Oct.

1970

Nov.

1991 — Apr.

1995

Term of Note
24 years,

6 mos.

The above tables show the extended maturity dates and terms
(calculated with the most recent extension) for all Savings Bonus, and
Savings Notes (Freedom Shares).
Bonds with issue dates marked by an asterisk above will reccive
no further extensions and will cease to earn interest as of their respec­
tive maturity dates. To determine the final maturity date of one of
these bonds, add the number of years and months in the column, "Term
of Bond" to the issue date on the bond. For example, a Series E Bond
which bears an issue date of July 1942 has a 40-year term and will
mature in July 1C82. A Series H Bond which bears an issue date of
August 1954 has a term of 29 years, 8 months and will mature in
April 1984.

-5 CO M PARISON O F TE R M S A N D C O N D IT IO N S OF
SER IE S E A N D SER IES EE
A C C R U A L-TY P E S A V IN G S BONDS

Series E Bonds

Series EE Bonds

Offering Date

Terminate over-the-counter sales
December 31, 1979; terminate payroll
sales no later than June 30, 1980

Begin January 2, 1980; phase in
payroll sales through June 30, 1980

Denominations

$25, $50, $75, $100, $200, $500
$1,000, $10,000, $1 00,000

$50, $75, $100, $200, $500, $1,000,
$5,000, $10,000

Issue Price

75% of face amount

50% o f face amount

Term to
Original Maturity

5 years

11 years

Interest

Accrues through periodic increases in
redemption value to m aturity

Same

Yield

4% after 2 months, 4.5% first year,
increases thereafter to yield 6.5%
if held 5 years

4% after 2 months, 4.5% first year,
increases thereafter to yield 6.5%
if held 5 or more years

Retention Period

Redeemable any time after 2 months
from issue date

Redeemable any time after 6 months
from issue date

Annual Limitation

$7 ,500 issue price

$15,000 issue price

Tax Status

Accruals subject to Federal income tax
and to estate, inheritance and gift taxes Federal and state—but exempt from all
other state and local taxes. Federal
income tax may be reported (1) as it
accrues, (2) for year bond matures, is
redeemed or otherwise disposed; or
(3) in accordance with provisions of
exchange offering.

Same

Registration

In names of individuals in single,
coownership o r beneficiary form; in
names of fiduciaries or organizations
in single ownership only.

Same

Transferability

N ot eligible for transfer or pledge as
collateral.

Same

Rights o f Owners

Coownership: either owner may
redeem, both must join reissue request.
Beneficiary: only owner may redeem
during lifetime; both must join reissue
request.

Coownership: same.

Exchange Privilege

Eligible for exchange for Series H or
HH bonds in multiples o f $500, with
continued tax deferral privilege
applicable to accrued interest.
Limitations: see exchange offering
chart.

Beneficiary: same except that
consent o f beneficiary to reissue
not required.
Eligible, alone or with Series E bonds
or savings notes, for exchange for
Series HH bonds in multiples of $500,
with continued tax deferral privilege
applicable to accrued interest.
Limitations: see exchange offering
chart.

-6 CO M PARISON O F TE R M S A N D C O N D IT IO N S OF
SER IES H A N D SER IES HH
C U R R E N T IN C O M E-TYPE S A V IN G S BONDS

Series HH Bonds

Series H Bonds

Begin January 2, 1980

Offering Date

Terminate December 31, 1979

Denominations

$500, $1,000, $5,000, $10,000

Same

Issue Price

Face Amount

Same

Term to
Original Maturity

10 years

10 years

Interest

Payable semiannually by check

Same

Yield

4.71% first 6 months, 6.31% next 4%
years, 7.02% final 5 years to yield
6.5% if held to m aturity. During
extension, uniform payments based
on rate prevailing when bond enters
extended m aturity.

Payments based on 6.5% level rate,
however, bonds sold for cash will have
an interest adjustment applied against
redemption value, if redeemed within
5 years after issue. Bonds issued on
exchange will not be subject to an
interest adjustment for early
redemption.

Retention Period

Redeemable any tim e after 6 months
from issue date.

Same

Annual Limitation

$10,000 face amount

$20,000 face amount

Tax Status

Interest is subject to Federal income
tax reporting for year it is paid. Interest
subject to estate, inheritance and gift
taxes—Federal and state—but exempt
from all other state and local taxes.

Same

Registration

In names of individuals in single,
coownership or beneficiary form; in
names o f fiduciaries or organizations
in single ownership only.

Same

Transferability

Not eligible for transfer or pledge as
collateral.

Same

Rights of Owners

Coownership: either owner may
redeem; both must join reissue request
Beneficiary: only owner may redeem
during lifetime; both must join reissue
request.

Coownership: same.

Exchange Privilege

Issuable in exchange for Series E
bonds and savings notes, in multiples
of $500, with continued tax deferral
privilege applicable to accrued
interest.

Beneficiary: same except that
consent o f beneficiary to reissue
not required.
Issuable in exchange for Series E,
EE, and savings notes, in multiples
of $ 500, with continued tax deferral
privilege applicable to accrued interest
Limitations; E bonds eligible until one
year after maturity: EE bonds eligible
6 months after issue.

COMPARISON O F TH E TE R M S A N D C O N D IT IO N S OF
C U R R E N T IN C O M E BOND EXC H A N G E O F F E R IN G
Series H Exchange

-7 -

Series HH Exchange

Offering Date

Terminate December 31, 1979

Begin January 2, 1980

Eligible Securities

Series E Bonds and Savings Notes,
singly or in combination.

Series E Bonds, Savings Notes,
and Series EE Bonds, singly or in
combination.
Limitations: E bonds eligible for
exchange until one year after
maturity; EE bonds eligible for
exchange 6 months after issue.

Minimum Amount

$500 current redemption value of
accrual-type securities

Same

Annual Purchase
Limitation

Exempt

Same

Exchange Security

Series H Bonds including all terms
and conditions thereof.

Series HH Bonds, including all terms
and conditions thereof. HH bonds
sold for cash will have an interest
adjustment applied against redemption
value, if redeemed within 5 years after
issue; bonds issued on exchange will
not be subject to an interest adjust­
ment for early redemption.

Eligible Owners

Registered owners, coowners and
persons entitled as surviving benefi­
ciaries or next o f kin or legatees of
deceased owners.

Same

Tax Treatment

Accrued interest on retired securities
may be (1) reported on Federal income
tax return for year o f exchange (or
m aturity,-if earlier), or (2) deferred to
the taxable year in which the current
income bonds are redeemed, disposed
of or mature. Amount of deferred
accruals will be shown on face of new
bonds.

Same

Registration of
Bonds Issued on
Exchange

Tax deferred: New bonds will be in
name o f owner and in same forms as
securities submitted except that
principal coowner, as defined in
Circular, may change, add or eliminate
coowner or beneficiary.
Non-tax deferred: Any authorized form.

Same

Cash Adjustments

If securities submitted for exchange
have current value which is not an even
multiple of $500, subscriber may add
cash to reach next highest multiple or
receive payment of amount in excess
of next lower multiple. In the latter
case, amount o f accrued interest
included in refund must be reported
currently for Federal income tax
purposes.

Same

Questions and Answers
about the
Improved Rate on
Savings Bonds

Q. What securities will receive the benefit of the interest rate increase?
A. The increase will apply to Series E and H savings bonds, U. S. Savings
Notes (Freedom Shares), and the new Series EE and HH savings bonds
that will go on sale after January 1, 1980.
Q. When will the increase be effective?
A. The increase will be effective with the first
period that begins on or after June 1, 1979.
and paid as shown below.

full semiannual interest
It will be calculated

SERIES E SAVINGS BONDS
Q. How will the increase be applied to current purchases of Series E bonds?
A. Series E bonds purchased on and after June
1, 1979, will yield 6-1/2
percent, compounded semiannually, when held to original maturity, five
years after issue. The increase will be applied to the redemption values
of the bonds as a one-time bonus at original maturity. For example, a
bond purchased in June 1979 for $75 will have a redemption value of
$103.28, if held until June 1984. If the bond is redeemed before origi­
nal maturity, the yield will be less than 6-1/2 percent.
Q. How will the increase be applied to outstanding Series E bonds issued
before June 1979 that had not reached original maturity on that date?
A. (1) Bonds issued from December 1974 through May 1979.
These bonds will reach original maturity between December 1979 and
May 1984, five years after issu e. The increase will be effective for
the remaining time to original maturity, from the first semiannual

2

interest period that begins on or after June 1, 1979. It will be applied
to the redemption value of the bond as a one-time bonus at original
maturity. The bond will not receive the benefit of the increase if it
is redeemed before that date.
For example: A bond issued in January 1977 will begin another
semiannual interest period in July 1979. The increase in yield will be
calculated from that date to original maturity, and will be added to the
redemption value as of January 1, 1982, which is the original maturity
date. If the bond is redeemed before January 1982, it will not receive
the increase.
(2) Bonds Issued from July 1974 through November 1974.
These bonds will reach original maturity between July and November
1979, five years after their issue dates. As of the effective date of
the in c re a s e ---- June 1, 1979 ------they will have less than a full
semiannual interest period remaining before they reach original maturity.
For these bonds the Increase in yield will be applied to their redemp­
tion values at the end of each semiannual interest period after they
enter extended maturity.
For example: A bond issued in November 1974 will reach original
maturity in November 1979. The increase in yield will be added to the
redemption value of the bond at the end of each semiannual interest
period that begins on or after November 1, 1979.
(3) Bonds issued from September 1973 through November 1973.
These bonds will reach original maturity between July 1979 and

3

September 1979, five years and 10 months after their issue dates. As
of the effective date of the rate in c re a s e ----June 1, 1979 ------ they
will have less than a full semiannual Interest period remaining before
they reach original maturity. For these bonds the increase in yield
will be applied to their redemption values at the end of each semi­
annual interest period after they enter extended maturity.
For example: A bond issued in October 1973 will reach original
maturity In August 1979. The increase in yield will be added to the
redemption value of the bond at the end of each semiannual interest
period that begins on or after August
1, 1979.
(4) Bonds issued from December 1973 through Tune 1974 are in their
first extended maturity period June 1, 1979. See next question.
Q. How will the increase be applied to outstanding Series E bonds which
were in an extended maturity period on June 1, 1979?
A. Outstanding bonds in the first, second or third extended maturity period
on June 1, 1979, will have the increase In yield applied to their redemp­
tion value at the end of each semiannual interest period that begins on
or after June 1.
Q. How is the Interest rate Increase payable on a Series
A. The Interest rate increase credited to a Series E bond
maturity or during an extension is paid as part of the
value when the bond is redeemed.

E bond?
at original
redemption

4

SERIES H SAVINGS BONDS
Q. How will the increase be applied to current purchases of Series H bonds?
A. Series H bonds purchased on and after June 1 , 1979, will yield 6-1/2
percent, compounded semiannually, when held to their original maturity
of 10 years after issue. The increase will be applied to the amount of
each semiannual interest check. If the bond is redeemed before original
maturity, the yield will be less than 6-1/2 percent.
How will the increase be applied to outstanding Series H bonds issued
before June 1979 that had not reached original maturity on that date?
A. Outstanding Series H bonds that have been held less than 10 years as
Q.

of June 1, 1979, will receive an increase in the amount of the interest
check for each semiannual interest period that begins on or after June 1.
For example: A bond issued in April 1971 will receive the improve­
ment in the amount of the check for the semiannual interest period that
begins October 1, 1979, and for each semiannual interest period
thereafter.
Q. How will the increase be applied to outstanding Series H bonds that
were in an extended maturity on June 1, 1979?
A. Outstanding Series H bonds in the first or second extended maturity
period on June 1, 1979, will receive an increase in the amount of the
interest check for each semiannual interest period that begins on or
after June 1.

Q. Will the interest rate increase be applied differently to Series H bonds
purchased for cash and those purchased in exchange for Series E bonds
or savings notes?
A. No
Q. Will the term to maturity of E and H bonds be shortened as a result of
the interest Increase?
A. No. The 5 year original maturity for E bonds and 10 year original
maturity for H bonds remains the same. Extended maturities for E and
H bonds also remain the same.
Q. Is there any advantage to cashing in my older E and H bonds to buy
new bonds after June 1 ?
A. No. Yields Increase for all bonds, as detailed in earlier answ ers.
U. S. SAVINGS NOTES (FREEDOM SHARES)
Q. How will the increase be applied to outstanding savings notes?
A. All savings notes are in their first 10-year extension. They will have
the increase in yield applied to their redemption values at the end of
each semiannual interest period that begins on or after June 1, 1979.
The interest, including the increase, is payable as part of the redemp­
tion value when the notes are redeemed.

SERIES EE AND HH SAVINGS BONDS

6

Q. Will the Series EE and HH savings bonds that go on sale January 2,
1980, benefit from the interest rate increase?
A. Yes.
Q. How will the increase be applied to Series EE bonds?
A. Series EE bonds will yield 6-1/2 percent, compounded semiannually, when
held for five years, and they will continue to earn 6-1/2 percent there­
after to original maturity. The interest is payable as part of the redemp­
tion value when the bonds are redeemed. If they are redeemed within
five years from their issue dates, the yield will be less than 6-1/2
percent.
Q. Will the term to original maturity be affected by the interest rate increase?
A. Yes. The term to original maturity, originally announced as 11 years,
9 months, will be reduced to 11 years.
Q. How will the increase be applied to Series HH
bonds?
A. Series HH bonds will pay interest semiannually by check at a level rate
of 6-1/2 percent. However, bonds purchased for cash will be subject to
an interest adjustment if they are held for less than five years, and this
will reduce the overall yield. HH bonds purchased in exchange for
Series E or EE bonds or savings notes will not be subject to an interest
adjustment for early redemption.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102