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MONEY SMALL INVESTOR INDEX: INVESTORS FLOCK TO SAVINGS BONDS DESPITE LOWER RATE

 /ADVANCE/ NEW YORK, March 7 /PRNewswire/ -- Despite the Treasury's announcement last week that it was chopping the guaranteed minimum yield on savings bonds from 6 percent to 4 percent, small investors continued to buy them aggressively, according to data gathered for Money magazine's Small Investor Index.
 Several major banks report that sales, which were at record levels, remained strong. "People are complaining that the rate dropped," says Christopher Hula, a vice president at the Chicago National Bank, "but they don't see any better alternatives."
 Last year, individuals purchased $17.6 billion of Series EE bonds, far surpassing the previous high of $12.6 billion in 1944. In January of this year, they bought $2.5 billion worth, a monthly record. And the Treasury estimates that February sales ran around $2 billion -- or $24 billion at an annual rate.
 Savings bonds still offer several advantages over competing investments:
 -- At 4 percent, their yields are higher than the average paid on CDs, except for five-year certificates, which yield 5.03 percent.
 -- Savings bond interest is exempt from state and local taxes, which raises the bonds' effective after-tax yield by as much as half a percentage point in high-tax states such as California and New York.
 -- For couples with incomes under $68,250 ($45,500 for singles), savings bond interest also can be free from federal taxes if the proceeds are used for college tuition.
 -- And if interest rates do rise, yields on savings bonds will move up as well, since their maximum return equals 85 percent of the rate on five-year Treasury issues.
 Last week, the typical individual's portfolio, as tracked by the Index, rose $400 to a record $46,133. Stocks gained $241, and bonds soared $152. Certificates of deposit and money-market funds contributed $10.
 This Last Year % Change from a
 Week Week Ago Week Ago Year Ago
 102.37 101.49 94.16 +0.87% +8.73%
 Latest Changes for Each Asset
 % Change from a
 Category Index Week Ago Year Ago
 Stocks:
 NYSE 103.21 +1.22% +13.34%
 ASE/OTC 100.56 +2.05 +9.45
 Equity funds 102.15 +1.47 +8.17
 Bonds:
 Taxable bonds 104.37 +0.93 +13.49
 Municipals 106.99 +2.34 +16.24
 Bond funds 104.12 +1.10 +11.43
 Cash:
 CDs 100.63 +0.07 +4.00
 Money funds 100.44 +0.05 +2.97
 Other:
 Real estate 100.83 +0.05 -7.81
 Gold 107.39 -1.22 -7.15
 Jan. 1, 1993 equals 100
 Where Average Small Investors Have Their Money Now
 Current Year Ago Current Year Ago
 NYSE 22.89% 23.36% Bond funds 6.87% 5.41%
 ASE/OTC 7.23 7.38 CDs 14.31 16.90
 Equity funds 6.76 5.20 Money funds 24.40 23.38
 Taxable bonds 8.74 9.81 Real estate 0.81 0.76
 Municipals 7.48 7.26 Gold 0.50 0.53
 Sources: Bank Rate Monitor, the Federal Reserve, Investment Company Institute, Lehman Bros., Lipper Analytical Services, Merrill Lynch, Money Fund Report, Morgan Stanley Capital International, National Association of Real Estate Investment Trusts, Prudential Asset Management, Standard & Poor's, Robert Stanger & Co., World Gold Council.
 -0- 3/8/93
 /NOTE TO EDITORS: This material is also available in printable form from AP GraphicsNet and Access services for graphics and tables (under the file name MoneyIndex) and from PR Newswire for full text./
 /CONTACT: Jordan Goodman of MONEY, 212-522-3618, or Patti Straus of MONEY public relations, 212-522-2695/


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Date:Mar 5, 1993
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