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Federal Reserve Bank
OF DALLAS
TONY

J . SALVAGGIO

DALLAS. TEXAS 7 5 2 2 2

F IR S T V IC E p r e s i d e n t

March 3, 1993
Notice 93-29
TO:

The Chief Operating Officer of
each financial institution in the
Eleventh Federal Reserve District
SUBJECT
New Minimum Savings Bonds Rate of 4% Set:
E ffe c tiv e for Bonds Sold Beginning March 1, 1993
DETAILS

The Department of the Treasury has announced that the 6 percent
guaranteed minimum rate on savings bonds is being lowered to 4 percent,
e f f e c t iv e March 1, 1993.
Series EE bonds issued on or after March 1 will be
subject to the new percent minimum rate. Outstanding Series E and EE savings
bonds and savings notes will retain their previously guaranteed minimum rates
until the end of their original maturity periods or current extended maturity
periods. Similarly, Series HH savings bonds issued on or after March 1 will
earn interest at a flat 4 percent, while outstanding Series H and HH bonds
will retain their current interest rates until the end of their original
maturity periods or current extended maturity periods.
This reduction in the guaranteed minimum rate is being taken in
response to the substantial decline in market interest rates over the past
year or so. The 6 percent guaranteed minimum rate has become an above-market
rate, spurring record sales of savings bonds and calling the cost-effectiveness of the savings bond program into question. The last change in the
guaranteed minimum rate took place on November 1, 1986, when the minimum was
reduced to 6 percent from I 2 percent, in response to a sharp drop in market
V
interest rates.
The market-based rate system and the other basic features of Series
EE bonds remain unchanged, guaranteeing bond owners a competitive return under
all market conditions. Series EE bonds held five years or longer earn the
higher of the guaranteed minimum rate or the market-based rate (defined as 85
percent of the average yield during the holding period on outstanding market­
able Treasury securities with five years remaining to maturity). Also,
interest on Series EE bonds is exempt from State and local income taxes, and
Federal tax may be deferred until a bond is redeemed or reaches final matur­
ity. Moreover, interest on the bonds may be exempt from Federal income taxes
altogether if the proceeds are used for qualified educational expenses and the
holder’s family income is within certain limits.
For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas:
Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162,
Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

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

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MORE INF ORMATION
If you have any questions, please contact the Savings Bond Division
at (800) 627-8266. For additional copies of this Bank’s notice, please
contact the Public Affairs Department at (214) 922-5254.
Sincerely,

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