The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FED ER AL RESERVE BANK O F NEW YORK Fiscal Agent of the United States Circular No. 8 5 1 1 February 2, 1979 -* TWO NEW SERIES OF SAVINGS BONDS Series EE and HH — Effective January 2, 1980 To All Issuing Agents for Savings Bonds in the Second Federal Reserve District: O n January 10, 1979, the U.S. T reasu ry D ep a rtm en t a n n o u n ce d plans to in tro d u ce tw o n e w series o f savings b on d s — Series E E and H H — in 1980, and also exp la in ed several oth er ch a n ges in the savings b o n d p rogram . P rin ted b e lo w is the text o f the a n n ou n cem en t: Treasury Secretary W . Michael Blumenthal today announced the introduction of new EE and HI1 U.S. Savings Bonds to replace the current E and H bonds effective January 2, 1980, a new exchange offering, and a decision on further extensions for outstanding bonds. The announcement came at the annual Washington luncheon o f the U.S. Industrial Payroll Savings Committee, a group of 60 major industrial leaders w ho volunteer their support to the savings bonds program. The Secretary said the program changes underline the Treasury’s interest in strengthening savings bonds as a vital part of its debt management operations. Bonds provide the Treasury with a stable source of funds from millions of citizens, and also provide Americans at all econom ic levels with an opportunity to save in a safe and convenient manner. The present E and H bonds will continue to be sold at banks and other savings institutions until D ecem ber 31, 1979. Payroll sales of E bonds will be converted to the new series EE in the period from January 2 to June 30, 1980. Series E E B onds The series EE bond — so named because it will double in value between its purchase and maturity dates — will have these new features: — the purchase price will be one-half the face value, e.g., $25 will buy a $50 (fa ce value) bond. — the lowest available denomination will be $50, face value. $100, $200, $500, $1,000, $5,000 and $10,000. Other denominations will be $75, — the interest rate of 6 percent (fo r 5 or more years) remains, while the term to maturity will be 11 years and 9 months. — the annual limitation on purchases will increase from the present $7,500 (issue amount) to $15,000 (issue amount). — the new EE bonds will be eligible for redemption six months after issue. — the requirement that a bond beneficiary must consent to a change in the bond will b e eliminated. Although the familiar $25 savings bond ($18.75 purchase p rice) will no longer be available, the new series EE $50 bond can be purchased for $25, an increase of only $6.25 in the minimum purchase price. ( OVER) Series HH Bonds The series H H bon d will have these new features, as com pared to the present H bond: — interest payments will be a level 6 percent from day o f issue, rather than the present graduated scale. — bonds purchased for cash (rather than through exchange of other savings bonds and notes) will be subject to an interest penalty if redeemed before maturity. — the annual purchase limitation will b e increased from $10,000 (fa ce amount) to $20,000 (fa ce am ount). The new series H H bonds can be bought for cash or obtained in exchange for the present series E bonds or savings notes, singly or in combination, in multiples of $500. The new HH bon d will have the same maturity period as the H bond — 10 years — and the same denominations, which range from $500 to $10,000. Outstanding Series E and H Bonds Changes which affect owners of the present E and H bonds are: — the earliest E bonds — bought between 1941 and April 1952 — will not be extended again when they fall due between 1981 and April 1992, after 40 years of interest-bearing life. — all outstanding series E bonds and savings notes bought after April 1952 will receive a further 10-year extension. The Treasury Department intends this to be the final extension for bonds bought from May 1952 through N ovem ber 1965. — series H bonds bought from June 1952 through May 1959 will receive no further extensions. These bonds reach final maturity between February 1982 and May 1989. — series H bonds bought after June 1959 will receive another 10-year extension, for a total bond life of 30 years. The Treasury Department intends this to be the final extension for these bonds. — owners o f E bonds and savings notes can exchange them for the new H H bonds after they go on sale January 2, 1980. This can be done up to a year after final maturity of the old E bonds. This exchange carries the same tax-deferral privilege as the present E to H bond exchange. Role of Savings Bonds Secretary Blumenthal said announcement o f the changes should dispel any uncertainty about the Treasury’s position on the final maturity of outstanding E and H bonds. Holders of the 1941-52 series E bonds will thus have the opportunity to decide well in advance of their bonds’ final maturities whether to redeem them for cash or exchange them for H H bonds. Approximately one out of three American households now own savings bonds, and more than 16 million p eople buy them yearly. A bout $80.7 billion in savings bonds and savings notes are now outstanding. Bond sales during 1978 exceeded $8 billion, for the highest sales since W orld W ar II. Since the Series E bond will no longer be sold after December 31, 1979, it will be necessary to recall early in 1980 all unissued bond stock in the hands of issuing agents. In order to keep the amount of stock that must be recalled to a minimum, we would ask you to monitor your stock inventory during 1979 so as not to build up excess levels. We would also encourage you to return to this Bank at any time during the year stock which you believe to be excess to your needs. You may particularly wish to review your levels of stock of the higher denomination bonds. Any excess stock returned to this Bank should be spoiled in the usual manner. We will make arrangements to supply each issuing agent with a working supply of the new Series EE bond stock during the last quarter of 1979. Enclosed are copies of charts that compare the present Series E and H bonds to the proposed new bonds. If you have any questions relating to savings bonds matters, please call our Savings Bond Division (Tel. No. 212-791-5972). P a u l A. V o l c k e r , P resid en t. SERIES E EXTENDED MATURITIES Date of Maturity (including new extension) Date of Issue ♦May May Feb. June Dec. June Dec. Jan. 1941 1952195719591965196919731980- Apr. Jan. May Nov. May Nov. Dec. June 1952 1957 1959 1965 1969 1973 1979 1980 May 1981 Jan. 1 9 9 2 Jan. 1 9 9 6 Mar. 1997 Dec. 1 9 9 2 Apr. 1 9 9 5 Dec. 1 9 9 8 Jan. 2 0 0 5 - Apr. Sept. Apr. Aug. May Sept. Dec. June 1992 1996 1998 2003 1996 1999 2004 2005 Term of Bond 40 years 39 years, 8 mos. 38 years, 11 mos. 37 years, 9 mos. 27 years 25 years, 10 mos. 25 years 25 years (payroll issues only) SERIES H EXTENDED MATURITIES Date of Maturity (including new extension) Date of Issue ♦June 1 9 5 2 - Jan. *Feb. 1957 - May ♦June 1 9 5 9 - Dec. 1957 1959 1979 Feb. 1 9 8 2 - Sept. 1986 Feb. 1 9 8 7 - May 1989 June 1 9 8 9 - Dec. 2009 Term of Bond 29 years, 8 mos. 30 years 30 years SAVINGS NOTES EXTENDED MATURITIES Date of Maturity (including new extension) Date of Issue May 1967 - Oct. 1970 Nov. 1991 - Apr. 1995 Term of Note 24 years, 6 mos. The above tables show the extended maturity dates and terms (calculated with the most recent extension) for all Savings Bonds and Savings Notes (Freedom Shares). Bonds with issue dates marked by an asterisk above will receive no further extensions and will cease to earn interest as of their respective maturity dates. To determine the final maturity date of one of these Bonds, add the number of years and months in the column "Term of Bond" to the issue date on the Bond. For example, a Series E Bond which bears an issue date of July 1942 has a 40-year term and will mature in July 1982. A Series H Bond which bears an issue date of August 1954 has a term of 29 years, 8 months and will mature in April 1984. Bonds and Notes which are not marked by an asterisk have been granted an additional 10-year extension. COMPARISON OF TERMS AND CONDITIONS OF SERIES E AND SERIES EE ACCRUAL-TYPE SAVINGS BONDS Series EE Bonds Series E Bonds Offering Date Terminate over-the-counter sales December 31, 1979; terminate payroll sales no later than June 30,1980 Begin January 2, 1980; phase in payroll sales through June 30, 1980 Denominations $25, $50, $75, $100, $200, $500, $1,000, $10,000, $100,000 $50, $75, $100, $200, $500, $1,000, $5,000, $10,000 Issue Price 75% o f face amount 50% o f face amount Maturity 5 years with guaranteed 10-year extension 11 years and 9 months Interest Accrues through periodic increases in redemption value to maturity Same Yield Curve 4% after 2 months, 4.5% first year, increases gradually thereafter to yield 6% if held 5 years 4% after 2 months, 4.5% first year, increases gradually thereafter to yield 6% if held 5 or more years Retention Period Redeemable any time after 2 months from issue date Redeemable any time after 6 months from issue date Annual Limitation $7,500 issue price $15,000 issue price Tax Status Accruals subject to Federal income and to estate, inheritance and gift taxes — Federal and state — but exempt from all other state and local taxes. Federal income tax may be reported (1) as it accrues, (2) in year bond matures, is redeemed or otherwise disposed; or (3) in accordance with provisions of exchange offering. Same Registration In names o f individuals in single, coownership or beneficiary form; in names o f fiduciaries or organizations in single ownership only. Same Transferability Not eligible for transfer or pledge as collateral. Same Rights o f Owners Coownership: either owner may redeem, both must join reissue request. Beneficiary: only owner may redeem during lifetime; both must join reissue request. Coownership: same. Exchange Privilege Eligible, alone or with savings notes, for exchange for Series H bonds in multiples o f $500, with tax deferral privilege. Beneficiary: same except that consent o f beneficiary to reissue not required. Eligible, alone or with Series E bonds or savings notes, for exchange for Series HH bonds in multiples of $500, with tax deferral privilege. There are some limitations on eligibility of E and EE bonds for exchange. COMPARISON OF TERMS AND CONDITIONS OF SERIES H AND SERIES HH CURRENT INCOME-TYPE SAVINGS RONDS Series HH Bonds Series H Bonds Offering Date Terminate December 31,1979 Begin January 2,1980 Denominations $500, $1,000, $5,000, $10,000 Same Issue Price Face Amount Same Maturity 10 years with guaranteed 10-year extension 10 years Interest Payable semiannually by check Same Yield Curve 4.2% first 6 months, 5.8% next 41/2 years, 6.5% final 5 years to yield 6% if held to maturity. During extension, uniform payments based on rate prevailing when bond enters extended maturity. Payments based on 6% level rate, however, bonds sold for cash will have an interest penalty applied against redemption value, if redeemed prior to maturity. Bonds issued on exchange will not be penalized for early redemption. Retention Period Redeemable any time after 6 months from issue date. Same Annual Limitation $10,000 face amount $20,000 face amount Tax Status Interest is subject to Federal income tax reporting in year it is paid. Bonds subject to estate, inheritance and gift taxes - Federal and state - but exempt from all other state and local taxes. Same Registration In names o f individuals in single, coownership or beneficiary form; in names o f fiduciaries or organizations in single ownership only. 0 Same Transferability Not eligible for transfer or pledge as collateral. Same Rights o f Owners Coownership: either owner may redeem; both must join reissue request. Beneficiary: only owner may redeem during lifetime; both must join reissue request. Coownership: same. Exchange Privilege Issuable on exchange from Series E bonds and savings notes, in multiples o f $500, with continued tax deferral privilege applicable to accrued interest. Beneficiary: same except that consent o f beneficiary to reissue not required. Issuable on exchange from Series E, EE, and savings notes, in multiples of $500, with continued tax deferral privilege applicable to accrued interest There are some limitations on eligibil ity of E and EE bonds for exchange. COMPARISON OF THE TERMS AND CONDITIONS OF CURRENT INCOME BOND EXCHANGE OFFERINGS Series HH Exchange Series H Exchange Offering Date Terminate December 31, 1979 Begin January 2, 1980 Eligible Securities Series E Bonds and Savings Notes, singly or in combination. Series E Bonds, Savings Notes, and Series EE Bonds, singly or in combination. E Bonds must be received no later than one year following their final maturity date; there are also some limitations on eligibility o f EE bonds for exchange. Minimum Amount $500 current redemption value of accrual-type securities Same Annual Purchase Limitation Exempt Same Exchange Security Series H Bonds including all terms and conditions thereof. Series HH Bonds, including all terms and conditions thereof except that bonds redeemed prior to maturity will not be subject to the interest penalty. Eligible Owners Registered owners, coowners and persons entitled as surviving benefi ciaries or next o f kin or legatees of deceased owners. Same Tax Treatment Accrued interest on retired securities may be (1) reported on Federal income tax return for year o f exchange (or maturity, if earlier), or (2) deferred to the taxable year in which the current income bonds are redeemed, disposed of or mature. Amount o f deferred accruals will be shown on face o f new bonds. Same Registration of Bonds Issued on Exchange Tax deferred: New bonds will be in name o f owner and in same forms as securities submitted except that principal coowner, as defined in Circular, may change, add or eliminate coowner or beneficiary. Non-tax deferred: Any authorized form. Same Cash Adjustments If securities submitted for exchange have current value which is not an even multiple o f $500, subscriber may add cash to reach next highest multiple or receive payment o f amount in excess o f next lower multiple. In the latter case, amount of accrued interest included in refund must be reported currently for Federal income tax purposes. Same
@FedFRASER