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FEDERAL RESERVE BANK OF DALLAS
F I S C A L A G E N T O F T H E U N IT E D S T A T E S

Dallas, Texas, February l8, 1966

IMPROVED INTEREST RATES ON SERIES E AND H SAVINGS BONDS

To all Qualified Issuing and Paying Agents
in the Eleventh Federal Reserve District:
President Johnson announced on February l6 an increase in
the interest rate on Series E and H United States Savings Bonds. The
Treasury Department's announcement and related documents are enclosed.
The official circulars are being printed by the Treasury
Department in Washington. As soon as they are available, possibly in
late March or early April, these circulars and other material will be
mailed to each issuing and paying agent. New tables of redemption values
for May and June, 1966, for Series E bonds will be furnished to all pay­
ing agents during April.
Stocks of bonds carrying the new terms and conditions are
being printed, but at this time there will be no general withdrawal of
stock of E bonds in the present design. However, all Series E and H
bonds purchased on or after December 1, 1965* will, carry the new interest
rate and redemption values and all other provisions as fully as if
expressly set forth in the text of the bonds themselves.
In the meantime, issuing agents should continue to use exist­
ing bond stock until notified to the contrary - possibly several months
from now - holding requisitions to a minimum consistent with sales.
Yours very truly,
Watrous H. Irons
President
Enclosures

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

TREASURY DEPARTMENT
WASHINGTON, D.C.
February 16, 1966

ADVANCE FOR 12:00 NOON, EST TODAY
WEDNESDAY, FEBRUARY 16, 1966

NEW SAVINGS BONDS INTEREST RATE

President Johnson today announced an increase in
the interest rate on United States Savings Bonds.
New
bonds will earn at the rate of 4.15% instead of the
previous 3.75%.
Future rates of earning on outstanding
bonds are also being increased.
Attached is a letter to the President from
Secretary Fowler recommending the new program and a
summary sheet detailing the new bond offerings directed
to all the Federal Reserve Banks and other issuing and
paying agents who transact U. S. Savings Bonds business
with the public., A printed circular will later be
distributed. Also attached are tables showing redemption
values and investment yields for Series E and H Bonds
issued beginning December 1, 1965. All Savings Bonds
purchased since December 1, 1965, will earn at the new
rate of 4.15% to maturity.
In addition to the issuance of new Series E and
H Savings Bonds at an interest rate above the previous
rate, the Presidential action raised the earnings after
December 1, 1965, of outstanding E and H Savings Bonds.

oOo

Attachments

T H E SECRETARY OF T H E T R E A S U R Y
W A S H IN G TO N

February 16, 1966

Dear Mr. President:
In your letter of January 18, 1966, you directed me to recommend
as soon as possible a higher interest rate on United States Savings
Bonds, in order to sustain and enlarge the vital role of this program.
You stated in your letter that a rate increase at this time would
serve important national purposes. This conclusion, meeting the require­
ments of the Act of September 22, 1959, which amended the Second Liberty
Bond Act, is clearly justified not only in view of the higher rates now
available on various private savings accounts, but also in light of cur­
rent needs to sustain vigorous non-inf1ationary growth and manage our
public debt soundly. Above all, such a move is in our national interest
now, so that a healthy economy at home provides maximum support to our
efforts on behalf of defending freedom in Viet Nam. With these facts
in mind, I recommend the following:
(1) that all Series E and H bonds sold beginning December
1965 earn 4.15/6 per annum compounded semiannually, if
held to maturity, with yields for shorter periods of
holding also increased from current levels;
(2) that all outstanding Series E and H bonds sold before
December 1965 earn 4/10 of 1$ more than before to next
maturity, starting with the interest period of five
months or more which begins on or after December 1,
1965, with lesser improved yields for shorter periods
of holding;
(3) that Series E bonds with issue dates of April 1956
through April 1957 (which had not reached maturity
before December 1965) on which a 3.75$ ten-year exten­
sion had already been promised and those with issue
dates of May 1957 through May 1959 on which a ten-year
extension had been promised earn interest at an annual
rate of about 4.15$ for each half-year period of holding
to extended maturity;
(4) that matured Series E bonds with issue dates of December
1945 through May 1949 (which had not reached first extended
maturity before December 1965) on which a 3.75$ second tenyear extension had already been promised earn interest at
an annual rate of about 4.15$ for each half-year period
of holding to second extended maturity; and

2
(5) that unmatured Series H bonds with issue dates of
April 1956 through January 1957 (which had not
reached maturity before December 1965) on which
a 3.75J5 ten-year extension had already been prom­
ised earn interest at an annual rate of about
4.15/5 for each half-year period of holding to
extended maturity.
Your approved of the above recommendations will enable the Treasury
to issue the necessary regulations and put them into effect.
Faithfully yours,

Henry H. Fowler

The President
The White House

SUMMARY

Improvements in Series E and H Savings Bonds, Effective December I, 1965

1.

New Series E and H bonds with issue dates of December 1, 1965 and after -­

earn 4.15$ compounded semiannually, if held to maturity (instead of former
3.75$)*

On the accrual type E bonds the increase from 3-75% to 4.15f> is

accomplished by reducing the term of the bond to 7 years (instead of former 7
years and 9 months).
cent of face value.

The purchase price of E bonds will continue to be 75 per­
On the current income H bond the increase is accomplished

by raising the amounts of the semiannual interest checks.

The H bond is issued

at par, is redeemable at par (on one month's notice after six months' holding),
and matures at par at the end of 10 years.
a)

There are also improved redemption values and investment yields

if the new E bonds are held for less than the 7 years to maturity.

Some

examples are:

When
held for:
1
2
3
5

year
years
years
years

Redemption
value per
$100 bond
$77.28
80.40
83.34
91.44

Period
held
3-02$
3.51
3-75

4.00

Yield for:
Period remaining
to maturity
4.34io
4.4l
4.46

4.52

b ) As before , interim yields on the new H bonds are generally in line
with the new E's for equal periods of holding.

Interest checks after the

first two will be level providing 4.3$> current income after the first year
of holding.

2
2.

Outstanding E and H bonds purchased before December 1, 1965 -- earn 4/l0 of

1jo more than before for the remaining period to next maturity.
lesser improvement in yields if bonds are redeemed earlier.

There will be

The increase will

be on a graduated scale, starting with the first interest period of 5 months or
more which begins on or after December 1, 1965.

There is no retroactive increase

in interest rates for periods prior to December 1, 1965*
3-

Interest rates on bonds entering a new extension period beginning December 1,

1965 :
a)

Unmatured E bonds:
1)

Issued April 1956 through April 1957 (which had not reached maturity be­
fore December 1, 1965 ) on which a 3-3/^$ 10-year extension had already
been promised and those issued May 1957 through May 1959 on which a 10year extension had been promised, will earn interest at an annual rate of
about 4.15$ for each half year period of holding to extended maturity.

2)

Issued beginning with June 1959 have already been promised a 10-year
extension privilege.

Interest rates and other terms and conditions

will be determined as they approach maturity.
b)

Matured E bonds, issued'
December 1945 through May 19^9 (which had not
reached first extended maturity before December 1, 1965 ) on which a
second 10-year extension had already been promised will now earn interest
at an annual rate of about 4.15$ for each half year period of holding to
second extended maturity.

c)

Unmatured H bonds, issued April 1956 through January 1957 (which had not
reached maturity before December 1, 1965 ) on which a 3-3/^$ 10-year exten­
sion had already been promised will earn interest at an annual rate of
about 4.15$ for each half year period of holding to extended maturity.

UNITED STATES SAVINGS BONDS - SERIES E
TABLE OF REDEMPTION VALUES AND INVESTMENT YIELDS
FOR BONDS BEARING ISSUE DATES BEGINNING DECEMBER 1, 1965
Table showing: (l) How bonds of Series E bearing issue dates beginning December 1 , 1965, by denominations, increase
in redemption 'value during successive half-year periods following issue; (?) the approximate investment yield on the pur­
chase price from issue date to the beginning of each half-year period; and (3) the approximate investment yield on the
current redemption value from the beginning of each half-year period to maturity. Yields are expressed in terms of rate
percent per annum, compounded semiannually.
Maturity Value....
Issue Price.......

$25.00 :$50.00 :$75-00 :$100.00 :$200.00 :$500.00 :$1 ,000.00 :$10,000
750.00 : 7,500
18.75 : 37.50 : 56.25 : 75-00 : 150.00 : 375-00

Period after
issue date

(l) Redemption values during each half-year period
(Values increase on first day of period shown)

First l/2 year....
l/2 to 1 year.....
1 to I-1/2 years...
l-l/2 to 2 years...
2 to 2-l/2 years...
2 -1/2 to 3 years...
3 to 3-1/2 years...
3-l/2 to 4 years...
4 to 4-l/2 years...
4-1/2 to 5 years...
5 to 5-l/2 years...
5-1/2 to 6 years...
6 to 6-l/2 years...
6-1/2 to 7 years...
MATURITY VALUE
(7 years from
issue date)....
*

$56.25

24.42

$37.50
37.92
38.64
39-40
40.20
4l.o4
41.92
42.84
43.78
44.74
45.72
46.72
47.76
48.84

71.64
73.26

89.48
91.44
93.44
95-52
97-68

$25.00

$50.00

$75.00

$100.00

$18.75

18.96

19.32
19.70

20.10
20.52
20.96
21.42

21.89
22.37

22.86
23.36

23.88

56.88

57.96
59-10

60.30
61.56
62.88
64.26

65.67
67 .ll
68.58
70.08

$ 75-00
75-84
77.28

78.80
80.40
82.08
83.84

85.68
87.56

$150.00

151.68
154.56
157.60

160.80
l64. 16
167.68
171.36
175•12
178.96

$375-00
379-20
386.40
394.00
402.00
410.40
419.20
428.40

437.80

191.04
195.36

447.40
457.20
467.20
477.60
488.40

$200.00

$500.00

182.88
186.88

$

750.00
758.40

772.80
788.00

$ 7,500
7,584
7,728

7,880

Approximate Investment Yield
(2) On purchase (3 ) On current
price from isredemption
sue date to be­ value from be­
ginning of each ginning of each
half-year
half-year perio
to maturity
■period
Percent
Percent

0.00
2.24

3-02

976.80

8,948
9,144
9,344
9,552
9,768

3.32
3.51
3-64
3-75
3-84
3-91
3.96
4.00
4.04
4.07
4.11

$1 ,000.00

$10,000

4.15

8o4.oo

8,040

820.80
838.40
856.80
875.60
894.80

8,208

914.40
934.40
955-20

Approximate investment yield for entire period from issuance to maturity.

8,384

8,568
8,756

4.15 *
4.30
4.34
4.38
4.4i
4.44
4.46
4.46
4.48

4.50
4.52
4-57
4.64
4.75

—

UNITED STATES SAVINGS BONDS - SERIES H
TABLE OF CHECKS ISSUED AND INVESTMENT YIELDS
FOR BONDS BEARING ISSUE DATES BEGINNING DECEMBER 1 , 1965
Table showing: (l) Amount of interest checks paid on United States Savings Bonds of Series H bearing issue dates
beginning December 1 , 19 65 ? by denominations, on each interest payment date following issue; (2 ) the approximate invest­
ment yield on the face value from issue date to each interest payment date; and (3) the approximate investment yield on
the face value from each interest payment date to maturity. Yields are expressed in terms of rate percent per annum,
compounded semiannually.
(Maturity Value
Face Value (Redemption Value l/
(issue Price
Period of time bond is held
after issue date
l/2 year......................
1 year.......................
l-l/2 years...................
2 years......................
2 -l/2 years...................
3 years......................
3-l/2 years...................
4 years......................
4-1/2 years...................
5 years.......................
5-l/2 years...................
6 years.......................
6-l/2 years...................
7 years......................
7 -1/2 years...................
8 years.......................
8-1/2 years...................
9 years......................
9-1/2 years...................
10 years (maturity^...........

$500
500
500

:
$1,000 :
$5,000 r
$10,000
:
1,000 :
5,000 :
10,000
:
1,000 :
5,000 :
10,000
(1) Amount of interest check for each
denomination
$ 5.50
9.70
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75
10.75

$11.00
19.40

$ 55-00
97-00

$110.00
194.00

21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50
21.50

107.50

215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00
215.00

107.50
IO7 .5O
107.50
IO7 .5O
IO7 .5O
107.50

107.50
107.50
107.50
107.50
107.50
107.50
IO7 .5O
107.50

107.50
107.50
107.50

: Approximate Investment Yield
:
on Face Value
: (2) From issue : (3) From each
„ ciane to eacn
interest payment
"interest payment
date to maturity 2/
‘
date
Percent
Percent
2.20
4.27
4.30
3-03
4.30
3.45
4.30
3.65
4.30
3.78
3-86
4.30
4.30
3.92
4.30
3.96
4.00
4.30
4.30
4.03
4 .05
4.30
4.07
4.30
4.08
4.30
4.10
4.30
4.11
4.30
4.12
4.30
4.30
4.13
4.30
4.13
4.14
4.30
4.15

l/

At all times, except that bond is not redeemable during first 6 months.

2/

Approximate investment yield for entire period from issuance to maturity is 4.15 percent per annum.

—

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