It is interest. Did you get a 1099INT from the bank or Treasury? If you have an actual Treasury Direct account, where your savings bonds are stored electronically. You need to log into that account and get your 1099-INT as a PDF download form within the account. They do not mail out paper 1099-INT forms.
Yes you need to report the interest you got. Enter Savings Bond interest like if you got a 1099-Int for it under
Federal Taxes tab (Personal for H&B)
Wages & Income
Interest and Dividends
Interest on 1099INT - Click the Start or Update button
Savings Bond interest goes in box 3 not box 1. So it won't be taxed on the state return.
Did you receive Form 1099-B for this transaction? If so, the redemption was taxable, and you should enter Form 1099-B to report proceeds from the maturity of a savings bond.
Otherwise, only the interest on the savings bond is taxable, and you should have received Form 1099-INT.
You'll find both these topics under Federal >> Wages & Income in TurboTax.
Additional information from TreasuryDirect: User Guide 265 - Learn More About Tax Reporting