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FEDERAL RESERVE BANK OF DALLAS
F IS C A L A S K N T O P T H E U N ITE D S T A T E S

Dallas, Texas, April 22, 1957

IMPROVED INTEREST RATES
ON SERIES E AND H SAVINGS BONDS

To Banking Institutions and Others Concerned
in the Eleventh Federal Reserve District:
There follows a statement issued by the Treasury Department with respect to improved interest
rates on Series E and H Savings Bonds:
“ Improved interest rates on new purchases of Series E and H Savings Bonds were
announced by the Treasury Department today, following the signing by President Eisen­
hower of the law authorizing the rate increases.
“ Series E and H bonds purchased currently will now yield 3% per cent per annum,
compounded semi-annually, when held to maturity. The former rate was 3 per cent. The
increase is effective for all Series E and H bonds purchased on or after February 1, 1957.
“ Another improvement in the new bonds is higher interest paid to holders who find
they have to cash their bonds prior to maturity. Both redemption values for the new E
bonds and interest payments on the new H bonds are substantially increased for the earlier
years.
“ For example, the redemption value of a new E bond is increased so as to yield 3 per
cent at the end o f 3 years, compared with 214 per cent heretofore, and to yield 3.20 per
cent at the end of 6 years, compared with 2.64 per cent heretofore.
“ The improved rates apply automatically to all E and H bonds purchased on or after
February 1, 1957; persons who have bought these bonds since that date need not take
any further action to insure getting the improved terms. This is true even though the E and
H bonds purchased since February 1 may have imprinted on them the former (and now
obsolete) tables of redemption values or interest payment scales. The issue date shown on
each bond will be controlling in determining the actual redemption values or scale of inter­
est payments, and banks and other paying agents have been furnished tables of the new
values.
“ The new E bonds mature in 8 years and 11 months and the new H bonds in 10 years.
Both issues formerly matured in 9 years and 8 months.
“ The Treasury pointed out that in most cases it will not be advantageous for the
holders of E and H bonds issued prior to February 1, 1957, to redeem their old bonds and
buy new ones. Any bond that is 2 years old or older and has not reached first maturity
will earn more than 3% per cent on its current redemption value as it grows to maturity.
In the case of bonds bought prior to last February 1 and held less than 2 12 years, only a
/
small gain could be realized by redeeming them to buy new bonds — typically not more
than a few cents per year in increased interest.

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

“ Series E bonds which have reached first maturity since May 1952 and are retained
under the optional extension privilege are already yielding a full 3 per cent, compounded
semi-annually, with the privilege of redemption at any time. If they were redeemed and
new E bonds purchased, the new bonds would have to be held 3 years before they would
earn as much as 3 per cent.
“ With the change in interest return the previous calendar year limit of $20,000 (face
amount) on purchases of each series by individuals has been lowered to $10,000. The
Treasury is withdrawing the present investment-type Series J and K bonds from sale,
effective April 30,1957. Both of these decisions underline the Treasury’s desire to emphasize
the savings bond as a security designed for millions of average individual American savers.
“ The Treasury announced that details of the terms of the new bonds have been for­
warded to Federal Reserve banks, which will circulate them to bond-issuing and redeeming
agencies throughout the country.”
Official Treasury Department circulars and other material will be mailed to all issuing agents,
paying agents and others as soon as they can be prepared.
Yours very truly,
Watrous H. Irons
President

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