Bearer Bonds

Bearer bonds are physical fixed-income certificates owned by whoever holds them, rather than by a named, registered owner. They pay interest via detachable coupons that the holder redeems for payment. Because ownership is evidenced solely by possession, bearer bonds behave much like cash: whoever has the certificate can collect interest and principal.

Key takeaways

• Bearer bonds confer ownership to the physical holder, not to a registered name.
• They were widely used historically but were discontinued in the U.S. in 1982 because they enabled theft, tax evasion, and money laundering.
• Today, nearly all bonds are issued in registered or book-entry form and tracked electronically.
• Old government-issued bearer bonds can still be redeemed under specific procedures; corporate bearer bonds may be redeemable only if the issuer or its successor still honors them.

How bearer bonds worked

Bearer bonds were issued by governments and corporations to raise capital. Each certificate included:
* a stated maturity date and principal (face) value
* a coupon interest rate and detachable coupons for periodic interest payments

To receive interest, the bearer detached the appropriate coupon and presented it to a bank or the issuing treasury for payment. At maturity the bearer presented the certificate to receive principal.

Why they were risky

Because ownership depended solely on possession:
* Lost or stolen bearer bonds were effectively irretrievable.
They provided anonymity, making them attractive for tax evasion, money laundering, and other illicit uses.
Advances in recordkeeping and electronic registration made bearer bonds unnecessary.

In the U.S., the use of bearer bonds was effectively ended by 1982 legislation; most countries followed suit or stopped issuing them for the same reasons.

Redeeming old bearer bonds (government-issued)

If you hold old bearer bonds issued by the U.S. Treasury, you can submit them for payment. General steps:
1. Gather the bearer bond certificate(s) and any attached coupons.
2. Complete IRS Form W-9 (for taxpayer identification and reporting).
3. Write clear payment instructions and provide the address where payment should be mailed.
4. Send the bonds, coupons, Form W-9, and instructions to the Treasury (use insured mail or another secure method).

For corporate bearer bonds, redemption depends on whether the issuing company (or its successor) still exists and will honor the obligation. Check the issuer name on the certificate and contact the company or its successor/transfer agent for guidance.

Modern bond issuance

Today, most securities are issued in registered or book-entry form:
* Ownership is recorded electronically in the investor’s name.
A transfer agent or registrar tracks owners and updates records when securities are bought or sold.
Electronic registration reduces theft risk and ensures payments go to the rightful owner.

Do bearer bonds still exist?

Bearer bonds are largely obsolete in the U.S. and many other jurisdictions. Some countries may still issue them, but they are rare. Many older bearer certificates remain in private hands and can sometimes be redeemed following issuer-specific procedures.

Conclusion

Bearer bonds offered anonymity and ease of transfer by virtue of being bearer instruments, but those same features made them vulnerable to theft and misuse. Modern financial systems have replaced bearer bonds with registered, electronic recordkeeping to protect investors and reduce illicit activity. If you possess old bearer certificates, check whether the issuer was a government or a corporation and follow the appropriate redemption procedures.