Savings bonds coming on strong with record sales

February 07, 1993|By Knight-Ridder News Service

The U.S. savings bond, once considered too stodgy for sophisticated investors, is making a strong comeback. Sales last year hit a record $17.7 billion, up from $9.5 billion in 1991. The previous mark was set in 1944, when savings-bond sales totaled about $12.4 billion.

To help explain the trend, the federal government conducted a survey of savings-bond buyers. Here are some of the findings:

* About 24 percent of those surveyed said they like the safety that savings bonds offer. (The bonds are backed by the full faith and credit of the U.S. government.)

* 21 percent said they bought the bonds through payroll deductions at work, and that forced them to save money automatically.

* Convenience was the major factor for 16 percent of the buyers. (Aside from payroll deductions, savings bonds also can be bought at many banks.)

* About 15 percent liked the interest rates. If held for at least five years, the bonds pay an annual rate of at least 6 percent. By comparison, the average yield on a 5-year certificate of deposit was 5.32 percent this week, according to Banxquote, a Wilmington, Del., firm that tracks CD rates.

* About 10 percent of the people said they liked the tax advantages of buying savings bonds. (Interest income earned from the bond is free of state and local taxes. And in most cases, no federal tax is due until the bonds are cashed in.)

As of Dec. 31, Americans had about $157.3 billion invested in savings bonds, up from $138.1 billion a year earlier.

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