While bearer bonds aren’t issued in the U.S. any more, a few are still in circulation. If you can find them you can still collect the value, and in some cases interest. Besides buying or inheriting bearer bonds, you can get them in the foreign countries that still allow them to be issued. However, they can be risky to own and can raise suspicions as they can be used for tax evasion or criminal activity.
Although the issuance of new bearer bonds ended in 1982, you can still find bonds for sale through a private seller, such as an investment broker.
Bearer Bond Basics
Some bearer bonds were sold by the U.S. Department of the Treasury while others were issued by banks and financial institutions. Congress prohibited the issuance of new bearer bonds in 1982. Unlike other types of bonds, where ownership is registered, bearer bonds as originally issued could be redeemed by anyone possessing them. Electronic banking changed how bonds were issued and accounted for, according to the New York Times. Because of their anonymity, bearer bonds were often used for tax evasion purposes.
Available Bearer Bonds
According to the U.S. Treasury there were still $89 million in non-redeemed U.S. Treasury bonds at the time of publication. Redeeming old bearer bonds can be difficult as many original issuers have gone out of business or merged with other financial institutions. Bearer bonds might be found as part of a retiree's investment portfolio and can be passed down to relatives.
Finding Bearer Bonds
Buying bearer bonds issued in the U.S. means finding a private seller. An investment broker is usually the best source for finding them and they're still honored by some banks. A few European, Central and South American countries still allow bearer bonds to be sold, including Luxembourg, but governments are cracking down. Even countries like Panama, seen by many as a tax haven, have now abolished the bearer structure. Exercise due diligence in researching the issuer as fraud is not unheard of.
Redeeming Bearer Bonds
Most bearer bonds have a face value of $5,000. Once a bearer bond is called, its face value is still redeemable but any interest payment coupons that haven’t been redeemed are invalidated. Holders of bearer bonds can collect interest on the bond by clipping and exchanging a series of coupons attached to the document. The issuing institution can call the bonds once they mature and notices are usually posted in financial publications.
Bearer Bond Risks
Owning bearer bonds can carry risks because of their similarities to cash. If lost, stolen or damaged, there is no way to replace them. Most of the anonymity that bearer bonds once offered is now gone. Even though the holder can still redeem the bond, they must register their Social Security number and pay taxes when doing so.
- Treasury Direct: Bearer and Registered Securities Balances as of 2018
- Financial Times: So You Thought Bearer Securities Weren’t a Thing Anymore?
- US Bank: Bearer Bond and Coupon Redemption Instructions
- Bayer. "Announcement of the conversion of the no-par value bearer shares to no-par value registered shares." Accessed Aug. 27, 2020.
- The National Archives. "Small Business, Enterprise and Employment Act 2015: Abolition of share warrants to bearer." Accessed Aug. 27, 2020.
- The Federal Council. "Federal Council brings Federal Act on Implementation of Recommendations of Global Forum into force." Accessed Aug. 27, 2020.
- Delaware Corporate Law. "Facts and Myths." Accessed Aug. 27, 2020.
- International Consortium of Investigative Journalists. "Explore the Panama Papers Key Figures." Accessed Aug. 27, 2020.
Terry Lane has been a journalist and writer since 1997. He has both covered, and worked for, members of Congress and has helped legislators and executives publish op-eds in the “Wall Street Journal,” “National Journal” and “Politico." He earned a Bachelor of Science in journalism from the University of Florida.