Bearer bond

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A nineteenth-century bearer bond

A bearer bond is a bond or debt security issued by a business entity such as a corporation or a government. As a bearer instrument, it differs from the more common types of investment securities in that it is unregistered—no records are kept of the owner, or the transactions involving ownership. Whoever physically holds the paper on which the bond is issued is the presumptive owner of the instrument. This is useful for investors who wish to retain anonymity. Recovery of the value of a bearer bond in the event of its loss, theft, or destruction is usually impossible. Some relief is possible in the case of United States public debt.[1] Furthermore, while all bond types state maturity dates and interest rates, bearer bond coupons for interest payments are physically attached to the security and must be submitted to an authorized agent, in order to receive payment.[2]


Bearer bonds have historically been the financial instrument of choice for money laundering, tax evasion and concealed business transactions in general. In response, new issuances of bearer bonds have been severely curtailed in the United States since 1982.[3]

All the bearer bonds issued by the US Treasury have matured by May 2016. The amount outstanding is approximately $87 million, as of March 2020.[4]

Chiasso financial smuggling case[edit]

From 2009-2012, a series of incidents involving the forgery and smuggling of U.S. bearer bonds in Italy and Switzerland occurred, beginning with the Chiasso financial smuggling case in June 2009, in which Italian financial police and custom guards seized documents purporting to be U.S. bearer bonds, totaling $134.5 billion in Chiasso, Switzerland, on the Italian border. The bonds were readily determined to be phony, the latest in a series of "billion-dollar bond" schemes that the United States Treasury calls "Morgenthaus."

United States policy and practice[edit]

In the United States, the Tax Equity and Fiscal Responsibility Act of 1982 substantially curtailed the issue of debt in bearer form. The act disallowed a tax-deduction of interest paid on any such bonds issued after 1982 by the issuer in the case of corporate bonds and removed the tax-exemption of the interest to the holder in the case of municipal bonds. In contrast, registered bonds retained the tax-exempt treatment.[5] A challenge to this tax treatment by the US state of South Carolina was heard by the US Supreme Court in the case of South Carolina v. Baker (1988), which upheld the law and brought to an end the further issue of virtually all US municipal bearer bonds.

See also[edit]


  1. ^ "Loss, Theft, Or Destruction Of United States Bearer Or Registered Securities Assigned As Payable To Bearer" (PDF). U.S. Treasury. February 2007.
  2. ^ Farley, Alan. "Bearer Bonds: From Popular to Prohibited". Investopedia. Retrieved December 12, 2019.
  3. ^ "Bearer Bonds: From Popular to Prohibited". Investopedia.
  4. ^ "Bearer and Registered Securities Balances as of March 31, 2020" (PDF). U.S. Treasury. Retrieved 2020-04-18.
  5. ^ "Section 11- Role Of The Transfer Agent". Trust Examination Manual. Federal Deposit Insurance Corporation. May 10, 2005. Retrieved October 3, 2013.

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