DEFINITION of 'Series HH Bond'

A 20-year non-marketable U.S. government savings bond that pays semi-annual interest based on a coupon rate. This coupon is locked in at a fixed rate for the first 10 years, after which it is reset by the U.S. Treasury for the rest of the bond's life. Interest on Series HH bonds is exempt from state and local - but not federal - taxes.


BREAKING DOWN 'Series HH Bond'

Series HH bonds were no longer available for purchase or exchange as of August 31, 2004.
Denominations were available in amounts ranging from $500 to $10,000 with no capital appreciation potential, but early redemption and exchange options after six months.

For many current HH bondholders, once the 10-year locked in rate expired, the coupon rate would fall as low as 1.5%. Investors should calculate the real return being earned to determine whether holding onto these bonds is the wisest choice or if the money received in redeeming the bonds could be put to better use in higher yield securities.

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