Series EE savings bond business definition

A U.S. Treasury obligation that pays a fixed interest rate and is sold to investors in denominations as low as $50 at a 50% discount from face value. Series EE bonds issued between May 1997 and April 2005 earn a variable rate of interest at 90% of the average yield on five-year Treasury securities for the previous six months. Series EE bonds issued after April 2005 earn a fixed rate of interest. Bonds may be redeemed after one year, but a three-month interest penalty is assessed for redemptions during the first five years. Federal income taxes on interest earned may be paid each year or may be deferred until the savings bond is redeemed. Interest earned on savings bonds is exempt from state and local taxation. See also Patriot Bond.