Conference nyoss1::market_investing

   When you cash in your savings bonds, the difference between the purchase
price and the amount received is simple interest.  There is currently very
little difference in taxes except for the line you put it on your 1040. 
If the capital gains tax reduction passes, then you would wish it was capital
gains.

   I don't know of any way to avoid paying taxes on the profit except to not
cash them in.

Brian 

I've experienced this lack of information at my branch bank also.  It's 
probably because the people are trained to be tellers, not bond experts.

But it's important that you find a knowledgeable and helpful person, 
because some bonds cease to pay interest after 30 years, others after
40 years.  You'll want to be certain you have the 40-year variety if you
don't redeem them.

Moffatt

    If it's Series EE bonds that you have, you might think about rolling
    them into H series bonds. There's an article about this in a recent
    issue of Business Week. H series are paying 6% now and are more-or-less
    liquid, if I understood the article. But the only way you can purchase
    an H bond is by trading in your EEs ...
    
    Brian

    You can convert your EE bonds to H bonds and not pay taxes on the 
    increase in value of the EE bonds...i.e. until you cash in your
    H bonds.
    
    The H bonds will pay semi-annual (?) intrest which is then taxable each
    year.
    
    Also, if you die without cashing in your H bonds....you can avoid the
    taxes ;-)     ...if it is less than the $600k deductible.
    
    One should not feel too bad for the government...they get a goodly
    portion of your money via inflation (also known as embezzlement).
    
    

    
    I have heard that some/all taxes on U.S.Bonds can be forgiven if they
    are used for education.  I have no details on the subject.  This is
    a new (within the last five years) change to the tax laws.
    
    Good luck
    
    Glenn Bowles

    There is NO WAY to avoid paying the taxes on acrrued interest on
    Savings Bonds. I'm going through the same thing myself. I've been on
    the phone to Federal Reserve Bank in Boston (617-973-3000... ask for
    Savings Bonds Dept.)
    I have bonds that were in mother's and my name since I was a kid and
    when she died , I had them reissued to me. I thought my "cost basis"
    would be value on that day that they were reissued - WRONG ! My cost
    basis is original issue price.
    I had them send out info on converting E,EE bonds to HH bonds,etc.
    (Don't have part #'s for brochures with me but will get over weekend).
    Also read J.K. Lasser's Tax prep guide last night(big book comes out at
    tax time each year, what's new for year,how to fill out all IRS forms, etc.
    ... came free with Value Line subscription.)
    All the books say that there is no way to avoid the tax. Technically,
    it says that the original sale of the bond is between the US Govt and
    original owner. It cannot be tranferred. You can either have them
    reissued to "new owner of record" upon proof of death certificate, or
    you can ,essentially,throw them away. If you have them reissued then
    you assume the original owners cost basis.
    
    For example, a $25 bond purchased in 1965 for 18.75 may be worth
    $120.00 today.If I died today and the bonds were reissued to my heirs 
    then their cost basis would be 18.75 not 120.00: so either my esate
    pays the tax on the 102.25, or the person to whom the bonds are
    reisssued assumes that tax liability to pay it later, but there is NO
    WAY to get that bond cashed without paying a tax on the $102.25.
    

    Question re: bonds for educational purposes.
    
    I started buying bonds for my 2 grandsons ages 20 months, 8 months.  I
    didn't have their SS numbers so used my son's.  The question is:  I
    thought if - when they are redeemed - they are used for education, then
    there is no tax. Is that so?  Should I put future bonds in my son's
    name? Not the babies?  The bank really threw me a curve last night when
    I went in to buy a bond for a present.  They said it had to be in my
    son's name.  I thought just the opposite was true.
    
    Anyone have an answer?
    
    Thanks in advance.
    

The rule for 'tax exemption' of the interest income is that the bonds must be
	- in the name of one or either of the parents
	- must have been bought after 1989
	- the owner must have been 24 years old when the bond was bought
	- the bond must be redeemed the year tuition & fees were paid
	- the amount of redemption must be equal to or less than the fees paid
	- the income of the parent[s] must not exceed a certain amount
		[think it is around $64,000 for joint filing]

Thus, if the aim is, as you've stated, to avoid paying taxes on the income
by redeeming the bonds your grandchildren start college, the bonds must be
in the name of your son/daughter-in-law, with their [son/daughter-in-law]
SS #s.

regards
-parthi

    In response to 46.4....
    You can turn in your E or EE bonds MORE than one year before final
    maturity, and get HH bonds in return (in multiples of $500 face value). 
    (Not H bonds: H bonds were from the 50's). 
    The new bonds will have the amount of accrued interest typed on the
    face of the HH bond.By trading your old ones in, they will no longer accrue
    interest but rather you will be mailed a check twice a year for that
    year's interest. That will continue until you redeem them or they reach
    final maturity (20 years from issuance of HH bond). Upon redemption,
    you then have to pay taxes on that accrued/deferred interest previously
    typed on the HH bond.
    
    Example:
    You have 10 $25 bonds from 1960 that you are going to exchange for HH
    bonds.
    1. what is the present value of old bonds? Let's say 125.50 each
    2. What did you pay for each . Let's say 18.75
    3. You have $1250.00 worth of value. Cost basis is $187.50
    4. You go to Federal Reserve Bank (or your local bank if they'll do it.) 
       and fill out form to trade them in.
    5. Present value= $1250. You can either get 1- $1000 bond and a $250
    refund (which must be claimed that year as interest income), OR you can
    write a check for $250 and get 1-$1000 and 1-$500 HH bond, deferring
    all interest until a later date.
    
    
    

    Thanks for the information re: bonds for grandsons' education.  From
    here on in, I will put it in my son's name.

    Is there any way to recover lost or stolen bonds or is it like losing
    cash? I'm wondering if I would have to rent a safe deposit box to store 
    them.
    
    rw
    

    
    	I believe they can be reissued, but you need to have the bond's
    serial number to make the process flow smoothly.  Unless you're talking
    about lots and lots of bonds, I wouldn't get a safe deposit box just
    to store them.  Compare the cost of the box (my small box is $35/year)
    to the additional interest you're getting on the Savings Bonds versus CDs
    of equivalent maturity.  You'll need to have a lot of money in the Savings
    Bonds before you break even on the deal.  If you don't get a box, just
    make sure that you keep a list (or two) of the bonds' serial numbers in
    a relatively safe place that wouldn't, for example, be destroyed by the
    same fire.
    
    							-craig

    
    I had my apartment broken into a few years back and, among other things
    that were taken, my collection of bonds "disappeared".  I had quite a
    few (a collection over 6 years or so from payroll plans).  I had the
    serial numbers of most of them stored in a different place, so that was
    helpful.  I didn't have all of the numbers, but that was okay too -
    they asked me for the SSN that they were registered under and the 
    approximate date range during which they were purchased. 
    
    The bonds were reissued by the government -- very little hassle or
    problems.  It tooks a month or two as I recall, but I had no
    immediate need for them anyway.
    
    After that I started keeping them in a safety deposit box, along
    with some other stuff, to avoid a similar problem in the future.
    
    Chuck

    My mother-in-law found two $25.00 savings bonds issued in her name from
    1943.  She is interested in their value now, and the process to redeem
    them.  Being unfamiliar with savings bonds, I couldn't answer any of
    her questions, but suggested that she talk with her bank.  Do these
    bonds continue to gain interest beyond the 10 years listed?  Any
    info, or approx. worth would be appreciated.
    
    Thanks,
    Tim
    

    You can call Federal Reserve bank in Boston at 617-973-3000. Ask for
    Savings Bond Dept. They will tell you what they are worth. Also, most
    banks can do the same. There is a redemption chart... just look up when
    issued... today's date        .
                                  .
                                  .
                                  .
                                  .
          ........................X
    
    and cross to present value. Yours probably accrued interest for 30
    years then reached 'final maturity.'
    
    

    re .12
    
    Check again the rates for Uncle Sam's EE bonds vs. your local bank's
    CDs.
    
    You'll find that Uncle beats them, even for as short a period as 6
    months.  In fact, EE bonds beat his own 5 yr. notes, per yesterday's
    auction, if you hold them for 5 yr.!
    
    This is such a good deal that Uncle forbids you from buying more than
    $15K per annum.

    
    	Re: .16
    
    	Oh, I agree that they are a good deal and provide a better interest
    rate than comparable CDs.  What I was suggesting, however, was that if
    a safe deposit box is being rented _only_ for the savings bonds as was
    said in the note that I was replying to, then the cost of the box has to
    be factored into the equation.  For example, lets say the box costs $35/yr
    (as mine does) and all I was storing was Savings Bonds.  Lets say the
    Savings Bonds are paying 1% higher than what its being compared against.
    The interest advantage of the first $3500 in bonds is taken up entirely
    to pay for the safe deposit box!  (Minus the deductability, if applicable,
    of the box.)  Savings Bonds _are_ a good deal, but not in low total amounts
    if a box is being rented specifically to store them.
    
    							-craig

   I discovered yesterday that I have to go through the process of replacing
some bonds that I never received from my payroll withholdings. In this case
most of it is handled by Digital. They verified that the request did go out
and they are sending me the paperwork to fill out. From what they said it could
take up to a few months for the FRB to replace them but that is not really a
problem.

   I do not keep my bonds in a safety deposit box but do keep them in a good
fireproof safe. I also keep a updated copy of the serial numbers at another
location. After the above discovery I also record the dates as well.


		/Ken

    So, combining a few recent thoughts, it seems wise to buy bonds and
    hold them at home, not renting a box 'cause it eats into your return.  
    Write down the numbers and keep THAT list in your safe deposit box.
    
    Ahhh, synergy!
    
      John

    
    	Re: .19
    
    	Or, if you don't want to rent the box just to store the list of
    serial numbers, write down where you put the list of serial numbers and
    store _that_ in the box.  ;-)
    
    	But seriously, who said anything about storing the list of
    non-boxed bonds in a safe deposit box?  I'd put it someplace that
    wouldn't get destroyed along with the bonds in a house fire, but that
    doesn't mean it has to be in the safe deposit box.  As long as the list
    lacks any kind of descriptive title to identify what these numbers are
    all about, there are lots of places where you can put a copy.  (And no,
    don't go poking in my desk drawers -- I store my bonds in the safe
    deposit box that I already had rented for other reasons...)
    
    							-craig

                        SAVINGS  BOND  MINIMUM  RATE  SCHEDULE
                               THROUGH  SEPTEMBER  1993 


                                Original        % Guaranteed    Date Next
        Issue Date              Maturity           Through      Extension       Bond
                                 Period         Current Period    Begins        Life

________________________________________________________________________________________
      SERIES 'E' Bonds
________________________________________________________________________________________


June 1959 - May 1965          7 yrs 9 mos          6.0 %       3/97- 2/03     40 yrs.     
June 1965 - Nov 1965          7 yrs 9 mos          4.0 %       3/03- 8/03     40 yrs.
Dec  1965 - Feb 1966          7 yrs                6.0 %       Coming due     30 yrs.     
Mar  1966 - Sep 1966          7 yrs                4.0 %       Coming due     30 yrs.
Oct  1966 - May 1969          7 yrs                7.5 %      10/93- 5/96     30 yrs.
June 1969 - Dec 1970          5 yrs 10 mos         7.5 %       4/95-10/96     30 yrs.
Jan  1971 - Nov 1973          5 yrs 10 mos         6.0 %      11/96- 9/99     30 yrs.
Dec  1973 - Feb 1978          5 yrs                6.0 %      12/98- 2/03     30 yrs.
Mar  1978 - Sep 1978          5 yrs                4.0 %       3/03- 9/03     30 yrs.
Oct  1978 - Jun 1980          5 yrs                7.5 %      10/93- 6/95     30 yrs.


________________________________________________________________________________________
      SERIES 'EE' Bonds                                                 All = 30 yrs.
________________________________________________________________________________________

Jan  1980 - Oct 1980          11 yrs               6.0 %       1/01-10/01
Nov  1980 - Apr 1981           9 yrs               6.0 %      11/99- 4/00
May  1981 - Oct 1982           8 yrs               6.0 %       5/99-10/00
Nov  1982 - Feb 1983          10 yrs               6.0 %      11/02- 2/03
Mar  1983 - Sep 1983          10 yrs               4.0 %       3/03- 9/03
Oct  1983 - Oct 1986          10 yrs               7.5 %      10/93-10/96
Nov  1986 - Feb 1993          12 yrs               6.0 %       9/98- 2/05
Mar  1993 -   ?               18 yrs               4.0 %       3/11-  ?

________________________________________________________________________________________




NOTE: Savings bonds earned a minimum of 7.5% if they entered an extended maturity
period between November 1,1982 and October 31,1986. They earn a minimum of 6.0% if
the extended maturity period began between November 1986 and February 1993. Bonds      
entering maturity periods on or after March 1,1993 earn a 4.0% minimum rate.

    Is there any benefit/differance in buying EE savings bonds on the last 
    vs the first day of the month?

    
    Interest is credited monthly, so if you buy on the last day of the
    month you get credited with interest for the entire month.  However,
    with rates about the 4-5% range, an extra month's interest isn't likely
    to be a very significant amount.

    
    >Interest is credited monthly, so if you buy on the last day of the
    >month you get credited with interest for the entire month.  However,
    
    Is this really true?
    
    I remember ages ago in basic accounting when we had to do problems of
    this kind where someone bought a bond on some day of the month and we
    had to calculated the prorated portion of interest that goes to the
    buyer since they didn't own the bond for the whole month.
    

    re: .24
    
    I've been wrong before, but I believe that interest is not pro-rated
    for EE bonds. 

    Yes, purchase on the last day of the month gets you interest from the
    first day of the month.
    
    Your bank might be able to confirm that; but if not, phone the U.S.
    Treasury.  (Over the weekend, it was announced that savings bonds sales
    would move from the Treasury to the Bureau of Public Debt; but I
    suspect it hasn't happened yet.)

Very basic (perhaps stupid) related questions about Savings Bonds:

My wife and I are holding some Series EE bonds with issue dates of 12/85 and
10/86.

- How/when does the interest on these bonds get paid? To my knowledge, we have
never received any interest payments (via check by mail). 

- Our address has changed since the issue date. Does that matter? 

- When these bonds "mature" (12/95 and 10/98, right?), they can be redeemed for
their face value?

Thanks,

Brian

    
    Any full service bank should be happy to redeem EE bonds, and
    accumulated interest will be paid at that time.
    
    I can't imagine anybody caring that your address has changed.
    

    re .27
    
    see .21 : interest is 6 months anniversary, so if you bought in January
    then get interest only on june 1 and jan 1. So make sure you hold until
    either 6 month or 12 month anniversary or you'll not get the
    accumulated interest. ( I f you redeem on May 28th you'll only get
    price up to Jan 1: if you hold until June 1 get additional 6 months
    interest.)
    
     

    6 months from January is July, not June.
    
    If you buy on Jan 31, do you still get interest July 1 and Jan 1 or
    do you have to hold for a full month to get interest, in which case it
    would be Aug and Feb???
    
    Ray

    All that matters is month of purchase; a bond bought Jan 1 is the same
    as a bond bought Jan 31; i.e. you get credit for January even if you
    buy on the last day of the month.

 Ok, the feds limit  purchases to 15K per annum.  Does this mean if one has
 not purchased any for a couple of years, nor will purchase any more for
 a couple years, they can purchase 30K at one time? 15K today and another 
 15 tomorrow?  got to wait 12 months between transactions?

 How large are the available denominations? eg would 15K take a wheelbarrel
 to get home?

 thanks!

 Bruce

    I would assume the limit is annual.
    
    Bonds are available in "big" denominations.  I think up to
    $5000 'face value', so your $15K would buy 6 bonds, but I'm not
    certain.  Definitely wouldn't take a huge number of bonds, however.

    
    Re .-2
    
    A couple can purchase $30,000 (money you give bank) to purchase
    $60,000 worth (bond face value).   $10,000 is the largest 'bond' face
    value ($5000.00 cash would be given to bank).
    ie. For $30,000 cash given to back would yield you 6 - $10,000 face
    value bonds.  Hope this helps.
    
    2 more quick questions regarding EE savings bonds ..
    
    1. What is currently the interest rate for EE savings bonds ?
    
    2. How often (annually, quarterly, semi-annually, etc do
       they decide if the rate should be changed ?
    

    800-US-BONDS will bring you a brochure of info,
    and maybe tell you how to get more detailed 
    questions answerd.
    
    Stan

 Current guaranteed rate is 4%
   "                        4.7

 Limit of 15K is per *calandar* year


 from 800.us.bonds

	a person in our group just had a baby and we are collecting money
to get some sort of gift.  i suggested a US savings bond.  since the gift
is for a newborn, no social sec. # exists yet.  can we still buy one w/o
a SS?  any other ideas?

    There are three numbers that you can fool with: 1) the SSN of the
    owner, 2) the SSN of a co-owner, or 3) the SSN of the beneficiary.
    You can by the bond in the name of the child and then what you
    probably want to do is fill in the mother or father's SSN as the
    beneficary. Whenever the child aquires a SSN, the bond can just be
    filled in with it. This covers all bases wrt the bond and keeps the
    FED happy as well.

    Does anyone know what the terms are on HH bonds? Face value, price, 
    period, maturity, current rates (and its basis), taxability, etc?
    
    Also, as I understand it interest on EEs can be tax deferred or you can
    pay the taxes 'as you go'; how do you calculate and report the latter?
    
    Dave

    
    	Thanks for the info, and the remainder, Dave.
    
    	US EE Savings Bonds have now become, IMHO, one of the worst
    long-term investments anyone can make. Bank CDs, Treasury Notes,
    etc. will give you better tha 4.1% annual return over a 17-YEAR
    timeframe. 
    
    	Who are these guys kidding?
    
    		the Greyhawk

    The 4.1% is just a guarenteed minimum, assuming you hold onto it for
    the full 17 years. It is highly likely that they will reach face value
    earlier than 17 years; as far as I am aware, the "long term" rate has
    never dropped below 4%, even during the low rates period a while back.
    
    The change is that you used to have a guarenteed minimum rate even 
    if you didn't hold it to its initial maturity; now they pay interest
    based purely on market rates, with a guarenteed max maturity period.
    
    As far as it being a good/bad investment; I don't think you can make a
    blanket statement. It depends upon your objectives. Some of the "nice"
    features are that they are zero risk, tax deferred, exempt from state
    and local taxes, and possibly exempt from federal if used for education.
    They are also readily available, in a wide range of denominations, 
    easily redeemed, and have no purchase or redemption charges/penalties.
    
    On the other hand, as you point out, return isn't exactly staggering :-)
    
    Dave

    
       ************ General Savings Bond Info Update *********
    
    
    This is the last month to redeem bonds at a 'local' Federal Reserve.
    I was talking to the folks in the Boston Fed last week. It's a
    cost-saving action. I just received the update in the mail.
    
    Here's the scoop:
    
    As of May 1,1995 ALL HH bond redemptions will be from the Buffalo Fed Reserve
    Bank. E and EE "can be performed by any authorized local savings bond
    agent. The majority of New England financial institutions are
    authorized to porvide issuing and/or paying agent services. If you do
    need to use a Federal Reserve Bank, the Buffalo Fed has been designated
    as the consolidation site FOR THIS AREA" (my emphasis - I'm in Boston:
    your Fed may vary). Buffalo Fed phone # 716-849-5232 or 5165.
    
    Also another sheet explained:   (after May 1,1995)
    Series EE bonds issued on/after May 1,1995 will earn interest based on
    market yields for Treasury securites from purchase through original
    maturity.
    Each May 1 and November 1, Treasury will announce two rates that will
    apply to Series EE bonds:
    - Short term savings bond rate -- adjusted semiannually - applied to
    bonds for the first five years.
    85% of the avg of 6 month Treasury security yields. The May 1 rate
    reflects market yields during the preceding Feb.,March and April. The
    Nov 1 rate reflects market yields during the preceding Aug,Sept and
    October.
    
    - Long term savings bond rate -- adjusted semiannually - applied to
    bonds after five years through original maturity at 17 years.
    85% of the avg 5-year Treasury yields. A new rate is announced and
    becomes effective each May 1 and Nov 1. The May 1 rate reflects market
    yields during the preceding Nov - April and the Nov 1 rate reflects market 
    yields during the preceding May through October.
    
    ***********  Face Value/ Denomination note:       *************************
    
    ... Because savings bonds earn market-based rates, there is no way to
    predict when a bond will reach its face value. ... If the market-based
    rates are NOT sufficient for a bond to reach face value in 17 years, 
    Treasury will make a ONE-TIME adjustment to increase its face value at
    that time.
    

    
    RE .41
    
    I believe it is the case that interest on the bonds is considered
    tax free if the bonds are used for education of family member.
    There are a number of restrictions. For example the bond must
    have been given to someone older than 24(?). I also think there are
    some income restrictions.
    
    If this is true, then I would think savings bonds are a good way
    to save for a child's education.
    
    						Ed
    
    

    
    	The income restrictions are ridiculous (after $60K of household
    income, you pay full taxes on the EE interest). 
    
    	My historical perspective is the paltry 4.1% interest guarantee
    on a 17-year hold of the bonds. A good G&I stock fund will give you
    at least 10% annual gain over the same timeframe. This is the
    difference between sending a child to Harvard as opposed to good
    old State U.
    
    	Would really hate to tell my daughter after 17-years "Here is
    $70,000 for college because we did EE bonds instead of here is
    $150,000 because we were in Fidelity Contra (or Blue Chip, or
    whatever)".
    
    	I still get EE bonds thru payroll deduction now, but they are gone
    after the holding period and the funds are immediately put to real
    work in two different funds.
    
    
    		the Greyhawk

    Gee Greyhawk, I'm glad you are able to consider 60K a
    ridiculous level. For some people, maybe even some people who
    read this notes file, that's a pretty good sum of money.

    Of course you are correct that investing in any growth mutual
    fund is a better long term better investment than savings bonds. 
    However I still disagree with your statement from .41:

>    	US EE Savings Bonds have now become, IMHO, one of the worst
>    long-term investments anyone can make. Bank CDs, Treasury Notes,
>    etc. 

    If you are able to qualify for the tax fee status then Bonds
    are better investments than CD's or Treasurys. They are also easier
    for most people to invest in. Further, many people are simply
    not secure with any mutual funds (a mistake on their part).

    Yes...many have done well enough, and learned enough so that their
    investment in Fidelity Contra will pay for Harvard. However for many 
    others, U.S. Savings Bonds could make the difference between State U.
    and nothing.
    
    					Ed

    Can somone simplify for me when and why someone would redeem series EE
    bonds for series HH bonds?  What are the benefits?  What are the
    drawbacks?  Is it as simple as the denomination amount (you need to
    work in large increments) or are there other factors to consider?
    
    Thanks!
    
    jeb
    

    Maybe it has already been stated, but the reason one would redeem
    series EE bond for HH bonds is that Series EE stops paying
    interest after 30 years.  The taxes are due even if you don't cash them
    in.  The one advantage of getting the HH is that one could continue
    to defer the interest from the previous 30 years for another 20 years.
    There may be some estate planning reasons for doing this also.
    
    Now for the bad news.  I believe that the Series HH interest, paid
    twice a year is taxable by the Feds.  The worse news is that I heard
    the interest paid is very low.  Something like 4%. 
    
    Don't hold me to this, but I think that the HH bonds are obtained in
    increments of $500.  The excess, under $500, is reported as income,
    assuming that you deferred interest on the Series EE.
    
    Bob
    

    
    I have two Series E bonds of which I am the owner (received as
    beneficiary from my uncle).  Could I transfer ownership to my
    son, and let my son pay the income tax when he cashes them in?
    He would be in a lower income bracket.
    
    ems

Publication 550 seems to indicate that you are liable for paying taxes on any
interest accrued while you held the bond and that your son would be liable for
any taxes from the time you give him the bond until maturity.  Just my
interpretation.

I suspect that there may be some more text in the IRS Gifts publication.


Chris

    
    Thanks, Chris, I'll check it out.
    
    ems

    I have some bonds I want to cash out.  I'd like to get the last
    interest payment if I'm close.
    
    Is May 1st the next interest payment date?  (Nov being the next)

    	It depends upon the month that they were purchased.  This
    was discussed back in .29-.31 or so.  Interest is paid every
    six months, so May 1st would be the magic date if the bonds
    were purchased during May or November.
    
    Cheers!
    Dave Eklund
    

    The terms on new Savings Bonds have been revised (again).
    
    IMO, These look MUCH more attractive.
    
    Dave
    
                     Treasury Secretary Robert E. Rubin
                   Makes U.S. Savings Bonds Announcement
                                      
                                      
   FOR IMMEDIATE RELEASE
   April 30, 1997
   
   I am pleased to announce a number of steps we are taking to make
   savings bonds more attractive investments for American savers.
   
   As you know, the rates on savings bonds are calculated every six
   months based on market rates on outstanding Treasury securities.
   Starting tomorrow, those calculations will be done differently in
   three important ways.
   
   First, the market rates on which the savings bond rate are calculated
   will be long-term rates, rather than the current combination of a
   short-term and a long-term rate.
   
   Second, the percentage of market rates that will be paid on savings
   bonds will increase from 85 percent to 90 percent.
   
   Third, interest on savings bonds will accrue monthly, instead of every
   six months. This will eliminate the problem of an investor losing up
   to five months interest by redeeming a savings bond at the wrong time.
   To encourage longer term holdings of savings bonds, however, there
   will be a three-month interest penalty if a savings bond is redeemed
   within the first five years of its issuance.
   
   These changes will make savings bonds more attractive and competitive.
   For decades, savings bonds have helped make the American dream a
   reality for millions of families -- helping to pay for everything from
   housing to education to retirement. About one in four Americans now
   owns a savings bond. That's good but we can -- and should -- do
   better.
   
   Improving the savings bonds program is part of a much broader effort
   by the Clinton Administration to encourage greater savings. For the
   nation, more savings means more investment and greater productivity.
   For families, that translates into higher wages and greater
   opportunity.
   
   Our savings rate is far too low in this country. The rate is
   equivalent to 4.2 percent of GDP, the lowest by far of the G-7
   countries, and lower than many developing countries. Increasing that
   rate has been a high priority for President Clinton. We have taken
   four steps to turn that priority into reality.
   
   First, we have instituted pension reforms to make pensions portable
   for workers and simplify the pension laws for businesses. Knowing that
   you can take your retirement benefits with you if you change jobs
   helps workers go where their skills and talent dictate.
   
   Second, we have proposed a number of measures to expand access to
   Individual Retirement Accounts. The Administration's proposals are
   designed to improve current incentives for saving in general, and
   retirement saving in particular, and to improve the effectiveness of
   IRAs, while significantly expanding IRA eligibility.
   
   Third, we introduced new inflation-indexed notes earlier this year.
   Our first two sales of this landmark security have been great
   successes. Next year, we will expand this effort by introducing the
   first inflation-indexed savings bond.
   
   Fourth, we are using technology in an effort to make information about
   the savings bond program more available to all Americans. We
   established a home page on the World Wide Web last spring where
   would-be investors are able to download the Savings Bond Wizard, a
   simple program that lets investors keep track of their bond holdings.
   Later this year, we will take another step to make savings bonds more
   available by introducing credit card purchasing on-line.
   
   The Treasury Department is committed to continuing to build on these
   measures. As we do so, we will raise the savings rate, which will, in
   turn, promote a stronger national economy and improve the economic
   prospects of middle-class families around the country. On Monday, we
   announced that we expect to issue $65 billion less in debt during this
   April-June quarter than will mature. This will be a record paydown and
   is largely the result of higher-than-expected tax receipts this month.
   It demonstrates the health of the economy and the continuing benefits
   of the President's deficit reduction program of 1993. I think this
   announcement demonstrates that we have been responsible and
   conservative in our budget forecasting and suggests that the deficit
   could be down for the fifth year in a row.
   

    
    A quick look at the web pages seems to indicate that old bonds
    will not be updated to reflect the new returns.  In order to
    get the better returns, holders of old bonds will have to redeem them
    and then purchace new bonds.
    
    					Ed
    

    That's always the way it's been, as far as I am aware.
    
    The previous terms (May95-Apr97) were generally considered to be
    a pretty poor investment. The ones preceding that (Mar93-Apr95)
    were the last bonds to still have a guarenteed minimum rate, and
    also the last ones to use the retroactive averaged rate method.
    
    The current terms aren't too shabby; 90% of return for 5 year
    treasuries over the previous 6 monthes, increase in value monthly
    (not semi-anually like most savings bonds), in a liquid investment.
    
    Anyway, I thought the readers here might be interested...