Hh Savings Bonds

HH Savings Bonds are a type of savings bond issued by the US government. They were issued from 1980 onwards, but no new HH savings bonds have been issued since 2004. However, since they are long term bonds with a twenty year maturity, many HH savings bonds are still outstanding.

607,000 people own HH Savings Bonds, with some 13.3 billion dollars invested in them. That may only be 7 percent of the invested in savings bonds but it is still a significant amount of money.

HH Savings Bonds were never sold directly to new investors. They could be acquired only through converting an existing investment in EE or E savings bonds, or by re-investing HH savings bonds that had matured.

Unlike some of the other US savings bonds, HH savings bonds were issued at face value and paid interest twice a year instead of accruing interest. (With many other US Savings Bonds, interest is credited to the bonds as it accumulates, but not paid until the bonds mature.) This made them suitable for investors who needed to guarantee a stable income, such as retirees.

The interest rate on HH savings bonds depends on when they were bought. The rate was set for the first ten years, after which it changed to the current Treasury rate. Bonds that were issued before 2002 and have not reached their tenth anniversary of issue are earning 4 percent interest, but the current rate is now lower, at 1.5 percent. This is not the best rate available on the market, but all US government Savings Bonds carry the government's guarantee, and are therefore the safest possible home for investors' money.

Now that the HH bonds have been retired, investors have a choice of two types of savings bond, either EE bonds or I bonds. EE bonds have a thirty year maturity and pay a fixed interest rate; they are issued at a 50 percent discount to face value. I bonds also have a thirty year maturity but pay interest at a rate that is linked to the inflation rate, and which is adjusted twice a year.

However, both these types of bond accrue interest and pay it to the investor only when the bond matures, or when the investor cashes it in. So while they are excellent vehicles for long term saving, they are not suitable for anyone who needs an income from their investment.