What happens to really old bearer bonds?

Had a reference question today where somebody had found a bearer bond from the 20’s in family effects, still has all the little coupons and stuff. He needed to know what happened to that company, so we spent some time with the Obsolete Securities and found that it got bought and bought and bought and is now a very large bank.

So, what I don’t know is, do those things continue to accrue interest? It’s a thousand dollar bond; is it a really bad investment (20’s thousand to 2016 thousand) or a substantial windfall?

With physical printed bearer bonds, the coupons are the interest. They should have dates on them and when that date was reached, you cut off the coupon and cashed it in, and that was your interest.

Take it to the very large bank and see what they say. Maybe they’ll honor it, or maybe they won’t.

The value of the bond is quite literally “face value” - whatever small interest payments are reflected on each coupon, plus the principal value. So it’s probably not worth very much given that all the interest and much of the principal will have been eaten by inflation.

It’s worth a thousand dollars if the bank will still honour it. They don’t continue to accrue interest just because your ancestor didn’t pick up the money he was owed.

It’s probably worth much more as a collector’s item.

So, in other words, this guy’s relative made the world’s worst investment. Unless, possibly, there is some collector value.

Well, no. It might have been quite a good investment if if had collected on it as it matured. By not collecting on it, he effectively turned it into cash. That was the poor investment decision.

Pretty much. The end value of such a bond is known at the time it’s purchased. There was no way to know at the time that the company it’s drawn on would be bought out and re-bought out however many times in the ensuing 90+ years. The positive return is when you collect the interest by cashing in the coupons when they mature, which apparently his relative failed to do.

If he’s lucky, the current bank will honor the face value and he’ll get $1000 out of it. Depending on the circumstances of how the original company went out of business, the existing company may or may not have any legal obligation to honor the bond.

Whatever you do, don’t clip the coupons now. If it has any collector’s value, you’ll decrease it by cutting those off. I’d first take it to an expert for an appraisal rather than to the bank.

Well, I’ll probably never see him again, although I did tell him to let us know what happens with it. First interesting reference question I’ve gotten in ages.