Can the value of a bond go down over the years?

Question

I received a "patriot bond" in May of 2005 for 50 dollars. I forgot about it and I never put it in the bank, thinking that it would mature on its own. Well now I wanted to cash it and I went on TreasuryDirect.gov to calculate the value and it said that my bond was now worth about 27 dollars! So is it possible for the value of a bond to go down as a reaction to the stock market?

Answer 1

Patriot Bonds like the series EE bonds are sold at 1/2 price of the face value of the bond. There is an interest penalty if you redeem before five (5) years. The length of the bond can vary from 10 to 30 years. In your case the Patriot Bond you received was purchased for $25 dollars and with the interest penalty is only worth $27 dollars today. Bonds are long term investments.

Answer 2

- The first answer is correct. A "patriot bond" is simply an EE bond. They simply added those words on to the face of an EE bond.

It was purchased for $25 and has since gone up $2.  

The interest rate on EE bonds, last I checked, was variable. They will continue to earn interest for 30 years whether they meet or exceed the face value, or not. It does compound interest.

The face value is at maturity and I think they originally figure like 25 years.

No, it has little relation to the stock market but since the rate is variable your return is influenced by interest rates.

Answer 3

Think of bonds and banknotes as being I O U's from your friendly Uncle Sam.

Uncle Sam says he will borrow $50 of gold and silver from you, and give you an IOU, written on white paper, which he calls a bond.   This IOU is good for the $50 when he pays it back, but in the meantime - he is going to pay you interest on the loan.  For the sake of argument, he will pay you $1 interest each year.

Uncle Sam then goes to the fat kid next door.  He borrows $50 from the fat kid, but he gives him an IOU which he writes on special green paper.  He calls this a 'greenback' and he won't pay any interest on this at all.  However - the fat kid has friends who own a bank, and if he puts it in their toybox, they will pay him interest on the 'greenback' of say, $3 per year.

Both IOU's are for $50 bucks when Uncle Sam gets out of jail and pays up the money, BUT - in the meantime, one of the green ones is worth three of the white ones, because the fat kid's friends are doing such a good offer on them.

If the fat kids friends can't do such a good deal one day, and they start giving out $0.50 interest each year for a greenback then - 'POOF!' - all the white IOU's will suddenly be worth two of the 'greenbacks', because they will be getting twice as much interest as the green ones.

It's all really, really simple....

My God, I should be running this country.

Answer 4

Probably this is tht answer to your question: some bonds sold to the average person, such as a US Savings Bond, are designatied by maturity value, not the when-purchased value. Thus a 25 dollar savings bond is only worth 25 dollars when it matures; the purchase price was much less. If sold before maturity, they obviously don't return their maturity value.

The stock market has no direct bearing on a bond's value. If this "patriot bond" was issued by the US government, my above statement is probably correct. It was originally purchased for less than 50 dollars.

Answer 5

Yes, traded bonds do, but not as much as shares. Also most of them have a maturity date when they will be redeemed at par, ie their nominal price (face value)..  

There are  also the guaranteed bonds offered by banks and building societies which are not traded and are redeemed at par on the stated date.

Note that bonds are only as safe as the issuing company or its  backers. In fact some are so risky, they are called junk bonds.