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TIPS FOR TELLERS AND ROND OFFICERS ABOUT UNITED STATES SAVINGS BONDS NEW BONDS ARE THE “ BEST-EVER” OLD BONDS IMPROVED TOO • Substantial improvements in the terms of Series E and H Savings Bonds, effective June 1 , 1959, make it important for the public to know the features which make both old and new bonds better than ever. This folder helps to answer the questions your patrons will ask. fbe Treasury thanks you for your helpful cooperation in explaining the new terms to bond owners, new buyers, end the general public. M e m b e r 23 , 1959. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) SERIES E N E W E BON DS W IT H ISSUE D A T E S , JU N E 1959 OR AFTER: EA RN 3 % % when held to maturity compared to the former 31/4 % (compounded semiannually.) M ature in 7 years and 9 months — 1 year and 2 months earlier than the former 8 years and 11 months. The higher interest rate means a shorter time to maturity. P ay a higher return for shorter terms of holding. 3 % when held 2 years as against 2 % % before. 31/ 2 % when held 4y2 years as against 3V s% before. Sam e d en om in a tion s as b e fo r e — $25, $50, $100, $200, $500, $1,000, $10,000. Sam e p rices as before— $18.75 for a $25 b o n d ; $37.50 for a $50 bond; $75 for a $100 bond; etc. E xten sion p riv ileg e for 10 additional years o f holding is provided. Interest rates and other terms and conditions to be determined as they approach maturity. N EW T E R M S apply regardless of what is printed on the bond if the issue date is June 1959 or after. As newly printed bonds become available they will carry the new terms, but new terms apply regardless on bonds back to June 1959. Accurate payment will be assured by the table of redemption values furnished all paying agents, on which current redemption values are auto* matically keyed to the issue date on each bond sold. Those who have purchased bonds beginning June 1959, but before the newly printed bonds are available, may exchange their old bonds for the new if desired, but they get the benefit of the new terms regardless. A L L O U TST A N D IN G E B O N D S W IT H ISSU E D A T E S P R IO R T O JUNE 1 9 5 9 : E A R N at least % % more than before from now to next maturity, with lesser improvement in yields if redeemed earlier. The improved rates start with the next full interest period beginning on or after June 1959. There is no retroactive increase in interest rates for periods prior to June 1959. T E R M to m atu rity or extended maturity is un changed. The higher rate for the remaining time means an increase in the new as against the former redemption values. F o r sh orter p e rio d s o f h o ld in g during extension, earning rates will begin at approxi mately 31/2% for the first V2 year of holding and increase uniformly to 3 % % at maturity. R e d e m p tio n value of a bond at the begin ning of the new extension will be the base on which interest will accrue during the 10-year extension period. 5. O T H E R E X T E N SIO N PR IV IL E G E S (a) Bonds with issue dates of May 1957 and after (including the new bonds) will have a 10-year extension privilege, with inter est rates and other terms and conditions to be determined as they approach maturity. (b ) Bonds with issue dates of May 1941 through May 1949 (already in their first extension period prior to June 1959, reaching ex tended maturity beginning May 1961) will have a second 10-year extension privilege. Interest rates and other terms and condi tions will be determined as they approach their present extended maturity. In addition to the tax advantage in continued holding of old bonds, by allowing the tax money to earn more interest, there is also an advantage in deferring the tax for people who expect to be in a lower tax bracket when they redeem their bonds after retirement. SERIES H ( S e rie s H b o n d s p a y In te re s t b y check e v e ry six m o n th s) N E W H BON DS W IT H ISSUE D A T E S O F JUNE 1 9 5 9 O R A F T E R have also b een im p rov ed . E A R N 3 % % the same as E bonds when held to maturity. M ature in 10 years as before. P ay a higher return for shorter terms of holding. 314 % when held 3 years as against former 3 % . 3 % % when held 5 years as against former 3% % . S a m e d e n o m i n a t i o n s as before — $500, $1,000, $5,000, $10,000. P r ice as well as redemption value at all times (including maturity) is p a r as before. H igh cu rren t in co m e . Interest checks after the first three will be level, providing 4 % current income after IV 2 years of holding. values ranging from $134.52 to $135.32 vs. old $133.33). E x a m p le: Former 3% (extension) bond dated December 1943 Investment yield from now on (as o f June 1, 1959) If held for: Formerly 1 more year . . . 3.04% 3 more years . . . 3.00 44/2 more years . . 3.04 (extended maturity) Now 3.14% 3.34 3.54 C on tin u in g to h o ld m a tu red b o n d s . It is m o r e advantageous to hold all former 2.9% (extension) bonds to extended maturity than to cash now and huy new bonds— (b ) above. It is also m o r e advantageous in m ost cases to continue to hold former 3 % (extension) bonds— (a) above. All of these bonds earn 3 % % or slightly more on their current redemp tion value if held to extended maturity. Many will reach extended maturity before the new bonds (dated June 1959 or after) earn 314% (at 41/2 years). However, even if the new bond does catch up, the difference in practically all cases is negligible. In addition, for income tax purposes, most peo ple treat the total interest earned since issue date, as income for the year in which the bonds are redeemed. They prefer this to paying a tax each year as interest accrues. The interest on matured bonds amounts to 25 percent or more of their total value and even at the lowest income tax rate the tax payable upon redemption mounts up. However, continuing to hold these bonds means that this tax money stays invested and earns more interest. Therefore, in most cases there is no gain at all from redeeming the old bonds to buy new ones. 4. IM P R O V E D E X T E N S IO N on bonds with issue dates of June 1949 through April 1957 (reaching maturity June 1959 and after) on which a 3 % extension had already heen prom ised. E arn 3 % % for the entire extension if held to extended maturity (new extended maturity values ranging from $145.00 to $150.20 vs. old $134.68). E xten sion p e r io d is 10 years, the same as before. Here is how the improved rates to the next maturity will apply. The improvement depends on the former rates on these bonds for holding to ma turity or for the full extension. 1. U N M A T U R E D B O N D S reaching original maturity beginning December 1959 (dated De cember 1949 through May 1959). (a) % % more on form er bonds with issue dates of February 1957 through May 1959 (new maturity values ranging from $103.20 to $104.24 vs. old $100.00). (h) % % more on form er 3 % bonds with issue dates o f May 1952 through January 1957 (new maturity values ranging from $101.08 to $103.60 vs. old $100.00). (c ) 6 / 1 0 % more on form er 2 .9 % bonds with issue dates of December 1949 through April 1952 (new maturity values ranging from $100.32 to $101.48 vs. old $100.00). Example: Former 3% bond dated June 1955 Investment yield from now on (as o f June 1, 1969) I f held for: 1 more year . 3 more years . 5 % more years (maturity) Formerly . . 3.38% . . 3.27 . . 3.49 Now 3.47% 3.52 3.99 Continuing to hold unmatured bonds. In all cases it is more advantageous to hold these bonds to original maturity and beyond to extended maturity (see description of improved extension below) than to cash them in to buy new ones. 2. BON DS M A T U R IN G , (reaching original ma turity June to November 1959) dated June to November 1949 (see description of improved extension below ). 3. M A T U R E D B O N D S which reached original maturity before June 1959 (dated May 1941 through May 1949). (a) % more on form er 3 % ( extension) bonds with issue dates of May 1942 through May 1949 (new extended maturity values ranging from $136.36 to $141.12 vs. old $134,68). (b) 6 / 1 0 % m o re on f o r m e r 2 .9 % (exten s io n ) b o n d s with issue dates of May 1941 through April 1942 (new extended maturity A LL O U TSTA N D IN G H B O N D S W IT H ISSU E D A T E S P R IO R T O JUNE 1 9 5 9 : EA RN Y2, % more than before from now on to maturity, with lesser improvement in yields if redeemed earlier. The im proved rates start with the next full interest period begin ning on or after June 1959. T E R M to m aturity is unchanged. The higher rate means an increase in the amounts of the remaining interest checks over the former scheduled amounts of checks to provide the y->% increase in yield if the bond is held to maturity. Example: Former 3 % bond dated June 1955 Amounts o f remaining semiannual checks (after June 1, 1969 for $1,000 bond) Checks Formerly Now First 3 checks . . . $17.00 $17.50 Next 4 checks . . . 17.00 19.10 Last 5 checks . . . 17.00 21.00 Continuing to hold outstanding bonds to maturity is more advantageous in all cases than cashing them in to buy new ones. OTHER SERIES Holders of matured and maturing Series F and G bonds, other than commercial banks, may apply the redemption proceeds to the purchase of new Series E or Series H bonds without regard to limit on hold ings (see below ). LIMIT ON HOLDINGS Investors in Series E and H bonds, other than commercial banks, may purchase and hold $10,000 face amount (original maturity) of each series in each calendar year. In conversations with bond holders or prospective buyers, they can be assured that Savings Bonds are sound investments for many other reasons besides their attractive interest return. Their most outstanding features are: Indestructibility — the Treasury will replace any bonds that are lost, stolen, mutilated, or de stroyed. Guaranteed rate of return over a period of years. Guaranteed redemption values — not subject to the risks of market fluctuations. Can be cashed anywhere in the country. Backed by the full faith and credit of the United States.