Sales of Savings Bonds Hit Highest Level Since 1945

Sales of U.S. savings bonds soared last month, climbing to $1.14 billion, the largest total in more than 40 years, the government reported Tuesday.

The Treasury Department said the sales total was 123% higher than the level of a year ago and was the highest monthly total since June, 1945, near the end of World War II.

During the past 11 months, Americans have purchased $7.2 billion worth of savings bonds, a 58% increase over the same period a year ago, while redemptions of bonds have dropped 10% to total $4.75 billion for the past 11 months.

Investors have been rushing to buy bonds because of the steady decline in interest rates on other investments and also out of fear that the government will soon lower the minimum guaranteed rate on savings bonds.

Since 1982, savings bonds held five years or longer pay an average of a floating rate set every May and November at 85% of the market value of five-year Treasury securities.

In addition, the Treasury has guaranteed that bonds held five years will earn at least 7.5% interest--no matter what happens to the floating rate.

Treasury officials said in July that they are considering lowering the minimum rate to some level below 7.5%. But they said bonds purchased before the decision was announced would qualify for the 7.5% rate, touching off the buying spree by investors. A decision to lower the rate has not been announced.