The US Department of the Treasury issues savings bonds. The interest rates offered on such bonds are subject to change every May and November, based on the current market rates and/or inflation.
US savings bonds can be acquired from commercial banks, most of which act as agents for the Treasury. They can also be purchased through your employer (through payroll deductions) and over the Internet. A savings bond may be registered in the name of a single person, two people or a primary owner and a beneficiary. These are known as single ownership, co-ownership and beneficiary savings bonds, respectively. At the time of maturity, savings bonds can be redeemed at various banks or any of the branches of the Federal Reserve.
It is important to keep a record of the serial numbers, issue dates and denominations of the savings bonds in case they are lost, stolen or accidentally destroyed. This information will need to be submitted to the Department of the Treasury to ensurethat your bonds are replaced.
The two main types of savings bonds are:
Series EE bonds: These savings bonds have a 30-year maturity period. Series EE bonds are typically sold at half their parvalue. While they are guaranteed to become worth their face value by the end of the term, this may happen much earlier, following which they continue to gain value. The principal is repaid, along with the interest, as a lump sum at the end of the term.
Series I bonds: These savings bonds are sold at their par value. They offer a fixed interest rate and an inflation premium. Series I bonds are designed for hedging inflation, with the premium protecting the purchasing power of the principal.
The advantages of savings bonds are:
The drawbacks of savings bonds are: