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MONEY SMALL INVESTOR INDEX: SMALL INVESTORS PUT BILLIONS BACK INTO MUNIS

 /ADVANCE/ NEW YORK, July 11 /PRNewswire/ -- Individual investors, including many who held municipal bonds that were repaid prematurely, are scrambling to plow nearly $19 billion back into tax-free bonds, according to data gathered for Money magazine's Small Investor Index. The investors' goal: to shelter the money from the new taxes that Congress is virtually certain to impose this year.
 The cash has come from two sources. On July 1, hundreds of municipal bond issuers, seeking to lower their interest expenses, redeemed about $15 billion worth of bonds before the securities' scheduled maturity dates, according to the industry newspaper Bond Buyer. The bonds typically were issued at least 10 years ago, when interest rates were as high as 10 percent, compared with around 5 percent today. In addition, in the first two weeks of July, muni issuers made about $22 billion worth of regular interest and principal payments.
 Together, both events pumped a whopping $37 billion out of muni bonds, with an estimated 51 percent going to individuals who promptly reinvested most of it in other munis. Merrill Lynch, for example, reports that sales of tax-free bonds have soared 40 percent in the past month.
 Analysts say the investors are making the right move. "Tax-free bonds should outperform Treasuries over the next few months," says Steven Narker, a first vice president in Merrill Lynch's municipal bond department. One reason: on an after-tax basis, high-bracket taxpayers earn more from 5 percent 10-year munis than from comparable Treasuries, now yielding 5.7 percent.
 Last week, the Small Investor Index, which tracks the typical individual's portfolio, rose $9 to a record $46,761. Stocks lost $18, while bonds returned $10. CDs and money-market funds contributed $9, and gold gained $7.
 This Last Year % Change from a
 Week Week Ago Week Ago Year Ago
 104.25 104.23 95.07 +0.02% +8.94%
 Latest Changes for Each Asset
 % Change from a
 Category Index Week Ago Year Ago
 Stocks:
 NYSE 104.50 -0.03% +11.49%
 ASE/OTC 103.73 -0.20 +24.33
 Equity funds 104.99 -0.24 +13.21
 Bonds:
 Taxable bonds 106.92 +0.21 +10.54
 Municipals 107.14 -0.08 +10.07
 Bond funds 106.81 +0.09 +9.34
 Cash:
 CDs 101.85 +0.07 +3.68
 Money funds 101.30 +0.05 +2.65
 Other:
 Real estate 102.00 +0.12 +0.22
 Gold 160.26 +2.00 +43.76
 Jan. 1, 1993 equals 100
 Where Average Small Investors Have Their Money Now
 Current Year Ago Current Year Ago
 NYSE 21.43% 21.48% Bond funds 7.35% 6.33%
 ASE/OTC 6.77 6.78 CDs 13.51 16.18
 Equity funds 7.72 5.92 Money funds 24.49 24.42
 Taxable bonds 9.81 9.82 Real estate 0.87 0.79
 Municipals 7.34 7.74 Gold 0.70 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- 7/12/93
 /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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GK -- NY064 -- 0016 07/09/93 15:21 EDT
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Date:Jul 9, 1993
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