With rates on passbook savings accounts and certificates of deposit at historically low levels, U.S. savings bonds have become an attractive investment for many Americans. Young couples saving for college, empty nesters nearing retirement, and seniors on fixed incomes have all invested heavily in the savings bond program.

But the U.S. Treasury Department, which issues savings bonds, has been looking closely at the cost of maintaining the program. This year it’s estimated that the savings bond program will cost the treasury about $154 million to maintain. That’s in contrast to only $50 million for running a much larger program for treasury bills, notes, and bonds. As a result, many in Congress and the government are looking for ways to reduce expenses in the savings bond program.

For example, the Treasury Department recently increased the minimum holding period for EE and I Bonds from six months to one year.

For HH Bonds, interest rates have been lowered from 4 percent to 1.5 percent, and in mid-2004 the government will stop issuing HH Bonds entirely. In addition, fixed rates on inflation-adjusted I Bonds have been cut from 2 percent to 1.1 percent. Lower interest rates mean less cost to the government.

Further changes are expected. Since 1986, treasury bills, notes and bonds have been available in an electronic format.

Not so for savings bonds. Because a significant cost of the savings bond program is keeping track of more than $700 million in paper bond certificates, the treasury plans to eliminate these paper certificates completely.

In the future, possibly as early as 2005, you can expect all savings bonds to be stored and tracked electronically. No more paper certificates in the mail.

Will these changes significantly impact sales of U.S. savings bonds, either positively or negatively? The next few years will tell.

Bertrand Labonte is an accountant with Ouellette, Labonte, Roberge & Allen Professional Association.