Sales of investment products through banks should rise in the wake of recent signs that interest rates may have peaked.

That's the consensus from a spate of interviews with bank and investment marketing executives last week following a rally in the financial markets.

The stock and bond markets surged after Federal Reserve Chairman Alan Greenspan said in congressional testimony that there were signs the economy might finally be slowing down.

The remarks seemed to indicate that the Fed may be through raising short-term interest rates.

"The comments have been very positive and I think the market has reflected that in the past couple of days," said David E. Murphy, an investment specialist at California-based Bank of Santa Clara.

Indeed, the stock market rallied Thursday, with the Dow Jones industrial average closing above 4,000 for the first time. The bond market had more modest gains after a rally earlier in the week.

But Richard White Jr., executive vice president at $1.6 billion-asset Cole Taylor Bank, Chicago, said he thinks investment sales activity has only just begun to perk up.

Mr. White said "there hasn't been a groundswell," but noted that bond mutual fund sales at Cole Taylor were up 20% over the previous week, with intermediate bond funds being the most popular investment.

He added that with certificates of deposit and government bonds now sporting attractive yields, consumers may "show some propensity to stay in fixed-income products." But Mr. White added that he was confident investors would "slowly move back into mutual funds in the next few months."

Nancy E. Graves, senior vice president at Mark Twain Bancshares, St. Louis, shares those sentiments. Though she declined to give figures, Ms. Graves said that sales of Mark Twain's proprietary Arrow Funds are already showing signs of strengthening.

"People have been sitting on the sidelines waiting for interest rates to peak, and if they think they have peaked, we should see all our investment areas benefit," Ms. Graves said.

Some executives said it might be premature to conclude that mutual funds will regain their popularity. Since mutual sales began dropping early last year, fixed-rate annuities moved in to take up much of the slack at banks' investment sales programs.

Joseph M. Petitti, executive vice president of Cal Fed Investment Services, Los Angeles-based California Federal Bank's brokerage unit, said annuity products will continue to be a hot item with his customers.

"The more stability in interest rates, the more business we'll see, in both fixed and later in variable annuities" said Mr. Petitti.

Sales of fixed-rate and variable-rate annuities at the thrift outstripped all mutual funds sales in 1994 by a factor of two to one, he said.

Michael E. Corrigan, a managing partner at Protective Financial and Insurance Services, a Santa Barbara, Calif.-based investment marketing company, said banks shouldn't expect a swift return to mutual funds.

"Retail consumers have always been way behind in their reaction to the general trend of the markets," said Mr. Corrigan.

"Look at CDs for instance," he said. "A lot of people think that banks are still offering CDs at 3#1/2% when, really, spreads between (fixed) annuities and CDs have narrowed considerably."

Customers at Key Bank of Maine haven't been fooled. Many have been rushing to lock in attractive yields on the bank's CDs, said Richard A. Molyneux, chairman and chief executive of the Portland-based division of KeyCorp.

Though no firm numbers were available, Mr. Molyneux said the bank has seen a resurgence in deposits, and though "it hasn't been dramatic, we've certainly picked up growth."

Mr. Molyneux added that he would be "somewhat ambivalent about" a mutual fund renaissance, fearing that his gain in deposits might vanish.

"I would like to see some sort of balance between deposits and mutual funds, but in our business I suppose that's unlikely."

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