what is a war bond 
a war bond is a debt security issued by a government to finance military operations during times of war or conflict because war bonds offered a rate of return below the market rate investment was achieved by making emotional appeals to patriotic citizens to lend the government money understanding war bondsa war bond is a debt instrument issued by a government as a means of borrowing money to finance its defense initiatives and military efforts during times of war a war bond is essentially a loan to a government the bonds were sold below their face value investors paid less than the face value initially and were paid the face value amount at maturity in other words war bonds were considered zero coupon bonds because they didn t pay interest payments throughout the year or coupon payments instead investors earned the difference between the purchase price and the face value of the bond at maturity war bonds were baby bonds which meant they had a smaller par value or face value than standard bonds this made them more affordable for retail investors another feature of the bonds was that they were nontransferable only the bond purchaser could redeem the bonds in the future war bonds originally had a 10 year maturity which resulted in a 2 9 return congress extended the interest that could be earned so that bonds sold from 1941 to 1965 accrued interest for 40 years bonds issued after 1965 accrued interest for 20 years after the end of world war ii war bonds became known as series e bonds the u s government continued issuing series e bonds until 1980 when series ee bonds replaced them characteristics of war bondswar bonds issued by the united states were a little different from other treasury securities war bonds or liberty bonds depending on the year were zero coupon securities meaning that they did not pay any interest over the lifetime of the bond moreover the face value was different from the actual price of the bond you would buy the bond at a discount typically between 50 75 of the bond s face value and receive the full face value when the bond matured the exact maturity date would depend on the year a war bond was issued a bond issued at the beginning of world war ii could only be cashed out ten years later congress later amended the law so that war bonds could continue to accumulate interest over 40 years the history of war bondsbesides the united states government other countries also issued war bonds including canada germany the united kingdom and austria hungary in the u s the war advertising council promoted voluntary compliance with bond buying motives to purchase war bonds were embedded in patriotism and conscience given that these bonds offered a rate of return that was below the prevailing interest rates in the market advertisements for the bonds were carried out through multiple media such as radio stations newspapers magazines and newsreels in theaters to reach the american people hollywood stars like bette davis and rita hayworth helped promote war bonds by touring the country people could save up for war bonds by contributing 25 cents each time the girl scouts also sold stamps valued at 10 cents each norman rockwell created several paintings as part of the advertising effort for war bonds after the russian invasion of ukraine in 2022 the ukrainian government announced an issue of war bonds to pay fighters and other military expenses on march 1 just after the invasion began the ukrainian government announced that it had raised 270 million from a one year bond with a yield of 11 1 the country issued several successive bond issues raising a total of nearly 1 billion 2advantages and disadvantages of war bondswar bonds allow the issuing government to quickly raise money to fund military campaigns governments that issue war bonds may appeal to patriotic feelings to sell the war bonds allowing them to offer a yield that is lower than current market rates they can also be used to reduce inflation by removing extra money from the economy for investors war bonds can also be a way to profit by speculating on the outcome of a war if one side suffers from a temporary military defeat investors can buy that country s war bonds if they expect a quick reversal however they also take the risk of losing their investment if the war is lost however they were not always an ideal vehicle for investments united states war bonds did not pay interest over the life of the bond and they offered lower profits than competing bonds moreover if a country borrows heavily to finance its war efforts it will have to repay all of those bills upon the conclusion of the war war bonds could be purchased for a price that was below their face value war bonds were guaranteed by the u s government investors experienced a sense of pride and patriotism by helping the nation in times of war paid a lower interest rate than other securities in the market war bonds did not pay interest payments throughout the life of the bonds as with any security war bonds carried the risk of a loss if sold before maturity for a lower price than the purchase price example of war bondsin the u s the sale of war bonds was overseen by the war finance committee war bonds were initially known as defense bonds and were first issued as liberty bonds in 1917 to finance the united states government s participation in world war i through the sale of these bonds the government raised 21 5 billion dollars for its war efforts after the japanese attack on pearl harbor on dec 7 1941 the u s entered the second world war and defense bonds were renamed war bonds more than 80 million americans purchased war bonds and brought in over 180 billion in revenue the bonds sold for 50 to 75 of their face value and had denominations ranging from 10 to 1 000 depending on the year they were issued 