Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, April 1, 1991                   TAG: 9103300066
SECTION: BUSINESS                    PAGE: B-5   EDITION: METRO 
SOURCE: Mag Poff
DATELINE:                                 LENGTH: Medium

HOW TO BUY FROM THE U.S. TREASURY

A: You must do some work to become a direct customer of the U.S. Treasury. Once your account is set up, however, you can automatically reinvest matured securities until you decide to terminate your account.

You must obtain and submit two forms. One is a "New Account Request," which asks for your name (or names, if this is a joint account), address, Social Security number, telephone number and information about the bank account to which your earnings will be sent by wire.

Depending on what you want to buy, the other form is "Tender for Treasury Bill," "Tender for Treasury Note" or "Tender for Treasury Bond."

You can obtain these forms by writing to the Federal Reserve Bank of Richmond, P.O. Box 27622, Richmond, Va. 23261-7622. If you have the booklet, the forms are probably among the exhibits in the back. You could simply fill them out and mail them to the bank in Richmond.

Treasury bills are issued with maturities of three months, six months or a year. You must invest a minimum of $10,000 and increments of $5,000 after that.

Notes have maturities ranging from one to 10 years, and bonds are generally issued for more than 10 years. The usual minimums are $5,000 for notes up to four years and $1,000 for bonds and longer-term notes.

As a so-called non-competitive bidder, you accept the average interest rate bid by international investment houses.

Treasury securities are the safest investment because they are backed by the full faith and credit of the government, if they are held to maturity.

But the value of Treasuries fluctuates on the secondary market inversely to the direction of interest rates. If you must sell prior to maturity, you risk losing a portion of your principal if the value is down. Of course, you might make a gain.

If you want to sell a security that you purchased directly, you must go to a commercial bank or a brokerage house, fill out the proper forms and wait for the transfer. Then you can sell on the secondary market. If you think you might have to sell, it would be easier to pay a commission and buy through a broker. Or you could stick to bills and short-term notes.

\ Go figure

Q: The government's cost of living index is running around 4 percent to 5 percent. In shopping you can see increases in some items of 15 percent to 20 percent. I had read in some publications that the true inflation rate is around 13 percent. Is this true?

A: The government's official cost-of-living monitor, the Consumer Price Index, for the economy as a whole increased 6.1 percent in 1990 after running several years between 4 percent and 5 percent. That index is broken down to monitor costs from various sectors of the economy. You can monitor it regularly by calling the Bureau of Labor Statistics at 202-523-9658.

Glenn Bowman, economist with Dominion Bank, said the index rose in February at only 0.2 percent, but many people said this gave a false picture because the volatile prices of food and energy were down sharply. So economists began to talk about core inflation, or the rate minus food and energy, which produced a figure of 0.7 percent.

Bowman said even that rate is misleading because about half the items covered in the index were affected by one-time events. He said most economists figure the cost of living increase so far this year is running at an annual rate of 4 percent to 4 1/2 percent.