How to Deposit Bonds: Physical and Electronic

The process of “depositing bonds” has evolved. For most modern bonds, this does not involve a physical deposit like cash. Instead, it refers to how bonds are held and managed electronically, or the procedures for converting older physical certificates into electronic form or transferring electronic bonds between financial institutions.

Understanding How Bonds Are Held

Investors primarily hold bonds in two main ways. Most bonds acquired today, including corporate, municipal, and many Treasury bonds, exist as electronic records within a brokerage account. When an investor purchases these bonds, the brokerage firm handles the electronic record-keeping, and ownership is reflected on account statements or online portals. This system eliminates the need for physical certificates and streamlines transactions.

Certain bonds, particularly U.S. Treasury bonds and savings bonds, can also be held directly with the issuing government agency through a direct registration system. TreasuryDirect, for example, allows individuals to purchase, manage, and redeem federal bonds electronically. In this system, the investor’s ownership is recorded directly by the issuer, bypassing physical certificates or a third-party brokerage. For newly issued bonds, a physical deposit is rarely required as they are electronic from their inception.

Depositing Physical Bonds

While most bonds are electronic, some investors still possess physical bond certificates, such as older U.S. Savings Bonds or rare corporate and municipal bonds. “Depositing” these physical assets involves either their redemption for cash or conversion into an electronic holding. The specific steps depend on the bond’s type and issuer.

For U.S. Savings Bonds, common types like Series EE, Series E, and Series I bonds can often be cashed at financial institutions. Alternatively, you can redeem these bonds by mail through TreasuryDirect by completing a specific form and sending it with the unsigned physical bonds. To convert paper Series EE or Series I savings bonds into electronic form, you must first create a TreasuryDirect account, then use the “Convert a Paper Bond” feature on the website, which generates a manifest to mail with your unsigned bonds.

Other physical bonds, such as older corporate or municipal issues, typically require working with a brokerage firm. These firms can facilitate the “immobilization” of the physical certificate, where the bond is held by a depository and converted into an electronic book-entry form. This process allows for electronic trading and management. Registered bonds have the owner’s details recorded with the issuer, providing a secure ownership record.

Transferring Electronic Bonds

Transferring electronic bonds involves moving them from one holding account to another. Common scenarios include moving bonds between brokerage accounts or between a direct registration system and a brokerage account. Before initiating a transfer, gather essential information such as account numbers for both institutions and the bond’s identifying numbers.

Transfers between brokerage accounts are commonly facilitated through the Automated Customer Account Transfer Service (ACATS). This system, typically initiated by the receiving brokerage firm, automates the transfer of various assets, including bonds. The receiving firm submits a request, and the process generally takes about three to six business days to complete. The ACATS system ensures that assets are transferred “in-kind,” meaning the specific bonds and their cost basis move to the new account without being liquidated, which avoids potential taxable events.

Transferring bonds from a direct registration system like TreasuryDirect to a brokerage account is also possible for marketable Treasury securities. This usually requires instructing TreasuryDirect to transfer the bonds, often involving specific forms. Series I savings bonds cannot be moved out of a TreasuryDirect account to a brokerage. The time frame for these direct registration transfers can vary.