Newspaper article St Louis Post-Dispatch (MO)

Direct Route to Treasuries More Investors Are Bypassing Mutual Funds

Newspaper article St Louis Post-Dispatch (MO)

Direct Route to Treasuries More Investors Are Bypassing Mutual Funds

Article excerpt

For people with a taste for U.S. Treasury securities, the current watchwords seem to be "help yourself."

In the wake of last year's jump in interest rates, American households are showing a marked preference for investing directly in Treasury bills, bonds and notes, rather than operating through mutual funds.

By the third quarter of 1994, households were adding to their direct holdings of Treasuries at an average annual rate of better than $150 billion, calculates Edward Yardeni, chief economist at the investment firm of C.J. Lawrence Deutsche Bank Securities Corp.

Working from Federal Reserve data, Yardeni reckons that mutual funds had at the same time become net sellers of Treasuries to the tune of close to $25 billion. Since last spring investors have been pulling money out of long-term Treasury and other bond funds.

Just a year earlier, funds were net buyers of Treasuries at average annual rates of as much as $50 billion, while household direct buying was less than that.

Why would so many people rather do it themselves now, especially at a time when most types of mutual funds other than bond funds remain highly popular?

One big reason appears to be the temporary result of shifts in interest rates, which have made yields available to direct buyers of Treasury securities look especially appealing by comparison to funds that own government securities. …

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