What Is a Series HH Bond?

The Series HH bond was a 20-year, non-marketable savings bond issued by the U.S. government. The Series HH bond pays semi-annual interest based on a coupon rate. The coupon was locked in at a fixed rate for the first ten years, after which the U.S. Treasury reset it for the rest of the bond's life. 

Series HH bonds are no longer available for purchase. The U.S. government discontinued these bonds as of Aug. 31, 2004. Bonds that didn't mature continued to receive interest payments.

Key Takeaways

  • The Series HH bond was a 20-year, non-marketable savings bond issued by the U.S. government. 
  • The bond paid semi-annual interest, which was locked in at a fixed rate for the first ten years, after which the U.S. Treasury reset it for the rest of the bond's life. 
  • These bonds were sold at face value and came in denominations of $500, $1,000, $5,000, and $10,000.
  • The U.S. government stopped selling Series HH bonds after Aug. 31, 2004 and did not replace them with another bond program.

How Series HH Bonds Work

The Series HH Savings Bond Program was designed with terms that appealed to the long-term investor. Starting in November 1982, Series HH bonds were only available in exchange for Series EE/E bonds or upon reinvestment of matured Series H bonds.

The majority of people who purchased these bonds used them to supplement retirement income since they provided interest until maturity. Series HH bonds were available in the following denominations:

  • $500
  • $1,000
  • $5,000
  • $10,000

These bonds were sold at face value, so the $500 bond sold for $500. Bondholders who invested in this series received paper certificates. There was no capital appreciation potential, meaning interest earned on this bond series was not added to the principal. Instead, it was paid out every six months into the bondholder's account by direct deposit. The bond did allow for early redemption and exchange options after six months.

Series HH bonds paid a fixed interest rate that was set on the day of purchase and locked in for the following ten years. Once the 10-year locked-in rate expired, the coupon rate fell as low as 1.5% for many Series HH bondholders. Because of this low rate, calculating the real return would help investors determine whether it was wise to hold onto the bonds, or redeem them and use the capital in higher-yielding securities.

Series HH bonds were discontinued as of Aug. 31, 2004.

Tax Implications of Series HH Bonds

Interest on Series HH bonds is exempt from state and local income taxes. But investors are required to report earnings from these bonds on their federal returns. Bondholders must file Internal Revenue Service (IRS) form 1099-INT to report their interest income on their federal tax return the year the interest is earned.

Series HH vs. Series EE Bonds

There are some similarities between the Series HH and Series EE savings bonds. But there are key differences between the two. Interest earned on Series EE savings bonds is returned to the principal value of the bond. This means the bondholder only benefits from the investment gains at the time the bond is cashed. In contrast, the Series HH bond paid interest income to bondholders every six months until maturity or redemption, while the principal value of the bond remained the same.

Interest payments were made automatically via direct deposit to the bond owner’s account every six months. For this reason, Series HH bonds appealed to risk-averse investors seeking regular income from their investments. Because Series HH bonds have the backing and full faith and credit of the U.S. government, they were considered a safe investment.