U.S. Savings Bonds may be purchased directly from the Treasury or from commercial banks. They are also often available through employee savings plans. And in recent years, they have been offered over the internet through some online brokers, and through the federal government.
When you buy a savings bond, you receive a registered savings bond certificate. There is no secondary market for savings bonds. They can not be resold or even given away.
Savings bonds are geared to small investors and come in denominations of $50, $75, $100, $200, $500, $1000, $5000, and $10,000. Investors may not purchase more than $30,000 worth of Series EE U.S. Savings Bonds per year, although you can also buy up to $30,000 in I Bonds, as well, totaling a maximum of $60,000 annually. Savings bonds earn interest for 30 years from the issue date.
There is a penalty for cashing in an EE Bond before it is five years old. The penalty is a deduction of three months' interest in the final payout. You are also prohibited from cashing in a Series EE bond within 12 months of purchase.
Series HH bonds are more difficult to buy - and hardly worth the effort. You can't buy HH bonds with cash. You can get them only in exchange for Series EE or Series E bonds or upon reinvestment of the proceeds of matured Series H bonds. When an HH bond is issued, you pay the face amount for the bond and interest is paid every six months, providing you with "current income." HH bonds are issued in denominations of $500, $1000, $5000, and $10,000.
Biggest concerns
U.S. Savings Bonds are very predictable investments. What you see is what you get. Because there is no secondary market for savings bonds, there's no concern about trading losses, and because they are issued and backed by federal government, there's no concern about loss of capital investment.
Timing
The best time to buy savings bonds is when interest rates are low and may be heading higher. Most other bonds carry a fixed rate, so you are stuck with the initial rate throughout the life of the bond - even if that's for 30 years. With Series EE U.S. Savings Bonds, the interest rate is adjusted every six months to reflect any changes in market interest rates. So if market rates are going up, the rate you'll receive from your Series EE bond will also go up.
By contrast, the worst time to buy savings bonds is when interest rates are high and may be heading back down. It would be better at that point to buy a conventional bond to lock in the high rate. With a Series EE bond, as the prevailing market interest rate drops, so does the yield you would earn on your savings bond.
Monitoring your savings bonds
Because you can't sell your savings bonds on a secondary market, savings bond prices never change. However, the yield changes every six months, so you might want to find out what interest rate your bond is paying for that period.
