# Bearer Bonds Explained: Definition, Function, and Value

![Bearer Bond: A fixed-income instrument that is owned by whoever has possession of it.](https://www.investopedia.com/thmb/6qLflMbkLTOKoZhg9doVT1pYMd4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/bearer_bond.asp-final-89b1bac5c00940ca8c87eb9e8c93c38a.png)

*— Investopedia / Julie Bang*

Bearer bonds, distinguishable for their lack of registration, grant ownership to whoever holds them, similar to cash. These physical certificates are historically significant but have become rare due to vulnerabilities like theft and untraceability. While obsolete in the U.S. and many other nations due to regulation and security concerns, old bearer bonds may still hold value and can be claimed under specific conditions. Learn about their characteristics, history, and current status in the financial landscape.

### Key Takeaways

*   Bearer bonds are fixed-income securities that provide ownership to whoever physically holds them.
*   These bonds were discontinued in the U.S. in 1982 due to being prone to theft and illicit activities like tax evasion and money laundering.
*   Current bonds are issued in registered form, ensuring rightful claims and mitigating the risks associated with bearer bonds.
*   Owners of old government-issued bearer bonds can redeem them through the U.S. Treasury by following specific procedures.

## What Is a Bearer Bond?

A bearer bond is a fixed-income security that is owned by the holder, or bearer, rather than by a registered owner. The coupons for interest payments are physically attached to the security. The bondholder is required to submit the coupons to a bank or government treasury for payment and then redeem the physical certificate when the bond reaches the maturity date.

As with [registered bonds](https://www.investopedia.com/terms/r/registered-bond.asp), bearer bonds are [negotiable instruments](https://www.investopedia.com/terms/n/negotiable-instrument.asp) with a stated [maturity date](https://www.investopedia.com/terms/m/maturitydate.asp) and a coupon interest rate.

Bearer bonds are almost nonexistent in the U.S. and some countries because their unregistered nature made them useful for money laundering, tax evasion, and other illegal activities. They also are vulnerable to theft. However, some countries still issue bearer bonds.

## How Bearer Bonds Operate and Why They're Risky

Bearer bonds are bonds that have no registration. These bonds are (were) issued by companies or governments and sold to investors to raise money. The owner of the bond certificate is the recipient of the bond's payments and the bond value at [maturity](https://www.investopedia.com/terms/m/maturity.asp).

In the U.S., bearer bonds were issued by the government and corporations from the late 19th century, after the Civil War, into the second half of the 20th century. They gradually fell out of favor as modern technology outmoded them, and investors shunned them because of their vulnerability to loss or theft. The U.S. government discontinued them in 1982 under the Tax Equity and Fiscal Responsibility Act of 1982.

## How to Redeem Old Bearer Bonds: A Step-by-Step Guide

If you still hold old bearer bonds, there are ways to claim them. The U.S. government states that if you have bearer bonds, you can send the bonds and coupons to the Treasury using insured mail. You should also include payment instructions, primarily an address, where the government can send the check. You will also need to include an IRS Form W-9.

1.  Gather your old bearer bonds and coupons.
2.  Fill out IRS Form W-9 for tax purposes.
3.  Write clear payment instructions, including your current address, for the U.S. Treasury to send your payment.
4.  Mail the bearer bonds, coupons, Form W-9, and payment instructions to the U.S. Treasury using insured mail.

Old bearer bonds issued by corporations may or may not have retained their face value, even if the maturity dates have long since expired. The holder of a corporate bearer bond can check for the name of the company that issued it and contact that company if it still exists, or the company that bought it out, if it was taken over. The bearer bond may be honored.  

## Modern Bond Issuance and Registration Processes

Unlike old bearer bonds, today's bonds are registered and tracked. Nearly all securities are now issued in book-entry form, meaning that they are registered in the investor’s name electronically. No physical certificate is issued.

A registrar or transfer agent is responsible for tracking the name of each registered stock or bond owner. This ensures that bond owners receive all interest payments due and that stockholders receive their cash or stock [dividends](https://www.investopedia.com/terms/d/dividend.asp).

Whenever a book-entry security is sold, a [transfer agent](https://www.investopedia.com/terms/t/transferagent.asp) updates the registered owner's name. Obviously, this system is highly automated, or it would collapse. This system must be highly automated; otherwise, it wouldn't work.

## Do Bearer Bonds Still Exist?

Bearer bonds may exist in some countries, but they are no longer legal in the U.S. It's also possible that some people are still holding on to old bearer bonds.

## What Is the Point of a Bearer Bond?

Bearer bonds, which no longer exist in the U.S., are used to secure debt financing. Whoever held the bond certificate was entitled to its value and coupon payments at maturity.

## What Do I Cash in Old Bearer Bonds?

If you have old government-issued bearer bonds, you can redeem them at the U.S. Treasury. You will need to send the government the bond certificate and coupons via insured mail and provide your address so they can send you a check. You will also need to fill out IRS Form W-9.

## The Bottom Line

Bearer bonds, once prevalent due to their anonymity, have largely been discontinued in many countries, including the U.S., due to the risks of theft and misuse. Modern bonds are now issued in a registered and fully tracked format, ensuring that only the designated owner receives payment. This evolution reflects advancements in financial regulation aimed at safeguarding investments through stringent registration and monitoring processes. As financial systems continue to develop, these regulations protect investors and provide a more secure investment landscape.  

> **Article Sources**
>
> 1.  U.S. Congress. "[H.R.4961 Tax Equity and Fiscal Responsibility Act of 1982](https://www.congress.gov/bill/97th-congress/house-bill/4961)."
>     
> 2.  TreasuryDirect. "[How Treasury Marketable Securities Work](https://www.treasurydirect.gov/laws-and-regulations/fraud/marketable-treasury-securities/)."
>     
> 3.  RecordsFinder. "[What Is Bearer Bond and Why the U.S. Banned It](https://recordsfinder.com/guides/bearer-bond-and-the-us-ban/)."
>     
> 4.  TreasuryDirect. "[Dealing With Old Paper Treasury Marketable Securities](https://www.treasurydirect.gov/marketable-securities/dealing-with-old-paper-marketable-securities/)."