Low-income buyers a surprise in All-Savers notes

When the Federal Reserve Bank of Atlanta surveyed some 3,200 investors in the new tax-free All-Savers certificates, it got a surprise. Some 41 percent of the buyers had low or moderate incomes - less than $30,000 a year.

These people weren't expected to buy the new one-year certificates. They could buy taxable investments, such as money market mutual funds, and get a better after-tax return, plus more liquidity; that is, quick access to their money.

But the modest-income investors went ahead anyway.

Does that mean these investors are unsophisticated?

Yes and no. The Atlanta Fed researchers figure that these people don't perceive money funds or, for that matter, higher-yielding tax-free municipal bonds and tax-free money market funds, as wise alternatives. The certificates offer a yield equal to 70 percent of the rate of 52-week Treasury bills at the latest auction. During the time of the survey, the first week after the All-Savers certificate was introduced Oct. 1, taxable money market funds were yielding around 16 or 17 percent. The certificates paid 12.61 percent at that time, compared with 10.77 percent now.

For a family in the 30 percent tax bracket, the certificate's 12.61 percent yield was equal to a taxable yield of about 18 percent. For a family in the 20 percent bracket, a comparable yield would have been 15.8 percent.

Also, the Atlanta researchers noted, the All-Savers certificates' effective yield is substantially better than the yield on passbook savings, money market certificates, 21/2-year certificates, or other certificates of deposit offered by commercial banks or thrift institutions. So people with money in these areas were improving their return by switching.

As for higher-income investors, they probably recognize the higher yields available in tax-free money market funds or tax-free municipal bonds, the researchers guessed.

Taxable money market funds yield about the same as the All-Savers certificates for someone in the 30 percent tax bracket and have the advantage of a check-writing facility. For someone in the 50 percent tax bracket, the taxable equivalent of 12.61 percent is about 23 percent. But if such high-income individuals can get more than the All-Savers yield in tax-free money market funds, they are better off. Another finding was that only 9 percent of those surveyed said they bought the certificates with money from an institution other than a bank, S&L, or credit union. In most cases, the ''other institution'' was a money market fund. Some 12 percent of the respondents, however, indicated that their money would have gone into money market funds if the new certificates were not available.

Most All-Savers certificate buyers, some 65 percent, converted from money market certificates. Only 8 percent used money in passbook savings and other time deposits. So the financial institutions should experience ''a quite modest improvement in interest margins'' - the key factor in the profitability of thrifts and banks, the Atlanta Fed concludes in a forthcoming issue of its Southeastern Economic Insight. That was one goal of Congress in permitting All-Savers certificates to be offered. It wanted to help the thrifts, many of which are in serious financial trouble.

The Atlanta Fed survey was conducted in cooperation with major banks and savings-and-loan associations in that regional Fed branch's six-state district - Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. But Donald L. Koch, director of research for the Atlanta Fed, said, ''The pattern and trends apparent here have to be true for the rest of the nation.'' The bank district includes some 31 million people, with a good cross section of high- and low-income people and many immigrants in such cities as Atlanta and Miami who come from other parts of the nation.

During October, investors put some $18.7 billion in All-Savers certificates in the nation's 5,000 savings-and-loan associations, according to the United States League of Savings Associations. As a result, deposits in the S&Ls exceeded withdrawals by an estimated $2.1 billion. Including interest credited to accounts, the industry's October savings gain was $4.3 billion, to a total of industry of $4 billion from March through September.

The All-Savers certificates are not the complete salvation of the thrifts, however. They will be most helped by a sharp drop in short-term interest rates that will reduce their cost of money. If they can also continue issuing mortgages at high interest rates, that should boost their average return on assets. But mortgage interest rates have already started down, following short-term rates.

Before the current thrift industry troubles are over, the regulatory agencies will probably have to rescue more big thrifts from financial collapse. In Manhattan, Greenwich Savings Bank has just been merged into Metropolitan Savings Bank. More such mergers are likely in coming months.