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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) - 2 - 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,