What is the difference between savings bonds and treasury notes and debentures?
Although savings bonds, treasury notes and debentures are all Central Bank issued securities, there are several differences between them:
Terms of Purchase Savings bonds are purchased at a discount, meaning that investors pay less than the nominal value and receive the full amount upon maturity, while treasury notes and debentures are sold at par, i.e. investors pay the full amount at the time of purchase.
Interest Payments Interest on holdings of savings bonds is accumulated throughout the five-year period they are held but only paid upon maturity or if the bondholder wishes to surrender them prior to that time. When savings bonds are surrendered before maturity, the bondholder is accorded interest based on the length of time the savings bonds were held. Interest on treasury notes and debentures is paid bi-annually.
Length of Investment Savings bonds are five-year securities, while the investment period for both treasury notes and debentures varies. The investment period for treasury notes can vary from one to 10 years and must be more than 10 years for debentures.
Minimum and Maximum Investments Savings bonds can be purchased in a range of nominal values from a minimum of $50 to a maximum of $100,000 ($200,000 for joint holders) per series. They must be purchased in nominal value increments of $50, e.g. $250, $300. The minimum investment for both treasury notes and debentures is $1,000 and all purchases must be in multiples thereof. There is no maximum investment for treasury notes and debentures.
Taxes The interest on savings bonds is tax exempt on holdings of up to $100,000 for individuals and organizations and $200,000 for joint holders, while the interest on treasury notes and debentures is subject to 12.5% withholding tax except for pensioners 60 years and older.
Transferability Savings bonds are non-transferable except in the event of the death of a bondholder. They can, however, be surrendered at any time prior to maturity. Treasury notes and debentures are tradable on the Barbados Stock Exchange but cannot otherwise be surrendered before the end of the maturity period.