Nonmarketable Government Securities – Series 7 Exam

🏛️ Nonmarketable Government Securities – Series 7 Exam

The Series 7 exam tests not only your knowledge of stocks, bonds, and mutual funds, but also your understanding of government-issued securities — including those that are nonmarketable. These special types of securities are critical for Series 7 candidates to know because they function differently from typical Treasury securities.

Here’s what you need to know about nonmarketable government securities for the exam.

📘 What Are Nonmarketable Government Securities?

Nonmarketable government securities are debt instruments issued by the U.S. Treasury that cannot be traded on the secondary market. They are issued directly to investors and must be redeemed with the government, not sold to other investors.

📚 Key Types of Nonmarketable Securities

🔹 U.S. Savings Bonds

• Includes Series EE Bonds and Series I Bonds
• Sold at face value (or with accrued interest in the case of I Bonds)
• Interest is earned over the life of the bond and paid at redemption
• Cannot be bought or sold between investors

🔹 Government Account Series

• Special nonmarketable securities held by government trust funds like Social Security
• Used for accounting purposes within government agencies
• Not available to the public

🔹 State and Local Government Series (SLGS)

• Issued to state and local governments for investing proceeds of municipal bonds
• Tailored to meet arbitrage rebate requirements under federal tax laws
• Not publicly traded

⚙️ Features of Nonmarketable Securities

✅ Direct Purchase and Redemption
Only the government can issue or redeem these securities.

✅ Fixed or Inflation-Linked Returns
Series EE Bonds offer a fixed rate; Series I Bonds offer a combination of fixed rate and inflation adjustment.

✅ Minimum Holding Period
Savings bonds generally must be held for at least one year, with interest penalties if redeemed within five years.

✅ Tax Treatment

• Interest on U.S. savings bonds is federally taxable but exempt from state and local taxes.
• Investors may defer federal tax until redemption.

✅ No Trading Price Fluctuation
Since they aren’t traded, investors avoid market price risks associated with other bonds.

⚖️ Marketable vs. Nonmarketable Securities

🧠 Series 7 Exam Tips

• Know that U.S. Savings Bonds (Series EE and I) are nonmarketable and cannot be sold once issued.
• Understand who purchases SLGS and why they exist.
• Remember the tax treatment advantages at the state and local level.
• Be able to contrast these securities with marketable Treasury securities like Treasury notes and bonds.
• Recognize that nonmarketable securities eliminate liquidity and market risk, but lock the holder into government redemption processes.

🚀 Master Government Securities for Series 7

Understanding how nonmarketable securities fit into the broader investment landscape can help you master critical sections of the Series 7 exam. Prepare with full content reviews, government securities breakdowns, and practice tests tailored for success.

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