Treasury redesigns its small-saver bonds

The friendly folks at the US Treasury Department who brought you the famous $ 25 Series E savings bond are frank to admit that getting people to try their products lately hasn't been easy.

For some time now, in fact, more outstanding bonds have been redeemed than new ones sold as small savers seek greater returns on their money through alternative money-market instruments. That costs the Treasury money, since the loss of revenue has to be compensated for by borrowing at high interest rates.

So, not unlike some of the nation's ailing automakers whose own products haven't been selling as well as they had hoped lately, the Treasury has designed a new product.

Congress soon will be asked to approve a variable-rate bond to assure long-term investors ''of an equitable return throughout their holding period,'' according to a Treasury official. This means that interest on the new bond - probably to be offered in the familiar $50, $100, and $150 denominations - will be tied to a percentage of money-market rates and will increase as they do. They may also be sold at face value, rather than under the current discount policy. (A $50 Series EE bond sells for $25.)

The move is being made in lieu of increasing the interest rate on existing Series EE and HH bonds, which the Treasury has the authority - but apparently not the inclination - to do. Those rates - currently 9 percent for Series EE and 8.5 percent for Series HH, when held to maturity - could have been hiked by 1 percentage point Nov. 1.

At a kickoff luncheon late last month for the Greater Boston 1982 savings bond drive, Steven R. Mead, deputy national director of the savings bonds division of the Treasury Department, said the prospect of the new bond causes him to be ''very optimistic about the near term.''

Optimism has been in short supply of late. From a record $8 billion in bond sales in 1978, volume fell steadily to $6.9 billion in 1979, to $4.1 billion in 1980. So far this year sales are slightly in excess of $2.5 billion.

Says John H. Bryan Jr., who as national payroll savings committee chairman has the task of trying to put some zest into sales efforts at this and other kickoff luncheons around the the US: ''I would like for there to be unequivocal support on every front. There is not. There is an element of controversy, and it comes out of a perception that savings bonds are a very poor instrument and - in this environment - a ridiculous thing for a person to be doing. That perception is wrong.''

But, says Benjamin Friedman of the National Bureau of Economic Research in Cambridge, Mass., savings bonds ''have been a very good deal for the Treasury - because they've been a bad deal for the public.''

Dr. Friedman says he would be surprised if the proposed variable-rate bond stimulated massive sales, ''but you might get a small number of people switching. If a person's alternative is to put $50 into a passbook savings account, bonds are a better deal - if you hold on to them long enough. But remember that you can't be talking about anyone who can afford to invest in money-market funds.''

The restructured bond has been on the Treasury drawing boards since early September after Congress came close to making deep cuts in the entire program over the summer.

While bond-program officials speak glowingly about the anticipated new product, however, they also are candid about the continuing difficulty of trying to persuade workers to put aside a given amount of their wages each month to buy bonds -- and payroll deductions amount to 75 percent of sales. Serious participation doesn't usually occur below the 40- and 50-year age brachet, and sales are heaviest in the industrial states of the Northeast and Midwest. The honor roll of US firms with a 50 percent or better participation rate (and at least 5,000 employees) so far this year numbers only 39.

Mr. Bryan's own company, the Chicago-based Consolidated Foods Corporation, reports a "13 to 15 percent" participation rate among its 85,000 employees, which he calls "respectable".

Robert P. Henderson, chairman of the Boston savings bond committee and chairman of the board of Itek Corporation, conceded: "The savings bond program has had its challenging times -- with inflation and interest rates at their present level." Mr. Henderson was featured in a full-page advertisement appearing in a Boston newspaper that read, in part: "Though 40 years old, savings bonds are not a thing of the past. They have adapted to a changing economy, and will continue to offer competitive interest. . ."

It is the more attractive interest rates available through other instruments that now command the attention of many Americans, however. That's fine with the Treasury Department, says Miss Johnston, but the money-market salesmen "should get down on their knees and be grateful for all the people who had money in savings bonds that they could put into their 15 percent instruments.