WHAT IS ‘Series HH Pact’
The Series HH bond is a 20-year non-marketable savings bond issued by the U.S. domination. The Series HH bond pays pays semi-annual interest based on a coupon reckon. This coupon is locked in at a fixed rate for the first 10 years, after which it is reset by the U.S. Cache for the rest of the bond’s life. Series HH bonds were no longer accessible for purchase or exchange as of August 31, 2004.
BREAKING DOWN ‘Series HH Bond’
The Series HH savings contract program was designed with terms that appealed to the long-term investor. During the years when they were available, Series HH bonds were readily obtainable in denominations ranging from $500 to $10,000 with no capital gratefulness potential, but early redemption and exchange options after six months. Starting in November 1982, Series HH engagements were only available in exchange for Series EE/E bonds or upon reinvestment of seasoned Series H bonds.
Series HH savings bonds were similar to Series EE scrapings bonds in some ways. However, any interest earned on Series EE scrapings bonds was added back to the principal value of the bond. That meant that the constraints holder would only benefit from the investment gains sometimes the bond was cashed. In contrast, the Series HH bond paid interest gains to bond holders every six months until maturity or redemption, while the owner value of the bond never went up. Payments were made automatically via unmistakable deposit to the bond owner’s account every six months. For this why and wherefore, Series HH bonds appealed to risk-averse investors seeking regular profits from their investments. Because the Series HH bonds were aided with the full faith and credit of the U.S. government, they were noted a safe investment.
TAX and INVESTMENT IMPLICATIONS of ‘Series HH Bond’
Interest on Series HH contracts is exempt from state and local — but not federal – income taxes. Bondholders be obliged file IRS form 1099-INT to report their interest profits on their federal tax return.
Series HH bonds paid a fixed enlist rate that was set at the day of purchase and locked in for the next 10 years. Directly the 10-year locked in rate expired, the coupon rate would collapse as low as 1.5% for many Series HH bondholders. Investors should calculate the trusted return being earned to determine whether holding onto these coheres is the wisest choice or if the money received in redeeming the bonds could be put to larger use in higher yield securities.