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What are war bonds?

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Quick Answer

War bonds are government-issued debt securities released to finance military operations during times of war. Typically, a war bond is issued at a return of rate that is lower than the average market rate for similar type of securities.

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The earliest instances of war bonds were not aimed at the general public as governments received loans from rich financiers. The first mention of war bonds appeared in the Act of 14 March 1812 that raised $11 million for the War of 1812.

During World War I, Austria and Hungary released war bonds to fund its war efforts. The first batch of bonds released to the Austrian public had a 5 percent interest rate and would come to term over five years. Hungary released its own form of war bonds and loans in 1919 and had a fixed interest rate of 6 percent.

Germany's war bonds during World War I were largely financed domestically and partially funded the public war bond drives. Germany's government issued nine separate bond drives during the war, which were spaced at intervals of six months. A majority of Germany's war bonds were set with semi-annual payment terms over ten years and had a 5 percent rate of return.

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