One-Year Treasuries Cease, Short-Term Options Persist.

YOU'VE seen your last one-year Treasury bill. The government isn't selling them anymore. One-year bills won't come back as long as the national debt keeps going down.

The change was announced on Jan. 31, although you might not have heard about it. The last auction of one-year bills was held on Feb. 27.

The Treasury will still be publishing a one-year rate, called a "constant maturity rate," but instead of being a real rate, it will be inferred from other rates. Investors can use it to measure the risk-free rate in the marketplace. You'd expect a one-year investment to pay more than the Treasury race.

The government will also use the constant maturity rate as a benchmark for its variable-rate loans. For example, it will establish what students pay for subsidized student loans. So you'll see references to the one-year rate, even though that bill doesn't exist anymore.

Any one-year T-bills you currently own are good until they mature. But after that, you'll have to choose another maturity -- or another investment -- instead.

Short-term investors can still get three- and six-month Treasury bills. That's the most likely place for today's one-year investors to move. You get the government guarantee plus frequent access to your money. Right now, three-month bills yield 4.76 percent.

Those who won't need their money for a while might consider two-year Treasury notes. They're yielding 4.47 percent -- just a hair less than you'd get from short-term bills.

Usually, the longer-term notes yield more. But if short-term interest races continue to fall, you might do better with two-year notes over the entire term.

Treasuries offer a tax advantage, especially to investors in highly taxed states. You pay only federal tax on the interest, not state and local tax.

You can buy Treasuries directly from the government. Either open an account by Web at treasurydirect.gov or call Treasury Direct for the paper forms. There's no fee unless your account is larger than $100,000. Then you pay $25 a year.

Treasuries are also available through banks and stockbrokers, but there's no point paying a commission when you can buy them free.

Still, many investors today are choosing to keep their savings somewhere else. "The return on short-term bills has just not been high enough over the last year," said Steve Ames of Ames Fee-Only Financial Planning in Annapolis, Md.

"There are so many alternatives, that ending the one-year Treasury bill is a non-event," said Kenneth Hoffman, a financial consultant with Merrill Lynch in New York. Options include bank certificates of deposit, money market funds and other government securities.

Ready cash earns the most today in money market mutual funds, available at mutual-fund groups and brokerage firms. Taxable funds currently yield an average of 5.16 percent, compared with just 1 percent to 2 percent in bank savings accounts. Taxable funds that invest in insured government securities yield 5.08 percent.

Money funds are as liquid as checking accounts. You can take out cash whenever you want, without penalty, and even write checks against the account. Unlike banks, however, funds generally require that the check be for $250 or more. (A few process checks for smaller amounts.)

Top-bracket investors should look at tax-exempt money funds, currently yielding around 3 percent. They net even more than you'd get from three-month Treasuries, after tax.

For longer-term savings, Ames has been using various types of bond mutual funds. "The past year has been the best year we've had in the bond market for quite a while," he said. Medium-term bond funds currently yield around 5.54 percent in dividends, according to Lipper, a firm that tracks fund returns.

But bond-fund returns aren't guaranteed the way Treasury securities are. Their value changes, depending on what happens to interest races.

When rates fall, bond funds earn capital gains. In the past 12 months, their total return has risen an average of 11.6 percent, Lipper reported. When interest races rise, however, you'll take a capital loss.

Tax Bill Benefits Will Accrue to Wealthy

Uh-oh. The Wall Street Journal has gone on a pro-debt campaign.

I don't mean your debt. The newspaper has a soft spot for the national debt. Its super-conservative opinion page recently published apiece headed, "Who's Afraid of the Big Bad Deficit?"

Coming hard on the heels of President Bush's proposed $1.6-trillion tax cut, that's not a good sign. Conservatives may not care if the tax cut overreaches, as long as it puts money in their pockets.

For me, here's the biggest argument for using the tax surplus to reduce the debt: We'll need the money for Medicare and Social Security when the boomers retire.

I doubt that Americans will accept many cuts in benefits. Most likely, we'll borrow to preserve this vital safety net -- and the less debt the country has when borrowing begins, the better off we'll be.

An alternative is to raise future taxes -- and guess which tax? Probably the payroll tax, because it's supposed to support the cost of Social Security and Medicare hospitalization. And payroll taxes are a far greater burden on the poor than on the rich.

Here's how the tax bill tips:

* Tax brackets. The proposed 10 percent and 25 percent brackets don't help only the people at chose income levels. Even the rich have part of their income taxed in these lower brackets. So they get the plebian tax cuts as well as a cut in the top bracket.

* Capital gains. Did you know that the tax on capital gains has already dropped this year on assets you will hold for more than five years?

The capital-gains rate falls to 8 percent for investors in the lowest bracket, down from 10 percent last year.

* Payroll taxes. When Bush said that "everyone benefits" from his tax cut, he isn't counting low to moderate earners. For them, the burden is Social Security taxes, which are not cut. A single mother of two, earning $22,000, gets no new tax break at all.

Jane Bryant Quinn