Sales of mutual funds in the U.S. took a slight dip in March, following two strong months that helped wiped away the stain of 1994.

But some bankers and fund executives that sell their funds through banks claim they didn't feel that March lull.

Instead, some report continued gains in cash flowing into funds as investor jitters about the market subside. And stabilizing interest rates have finally given investors reason to feel optimistic about bond funds, which have continued to see dramatic monthly outflows.

"Bond funds are starting to turn around as the net asset values turn back up," said Lloyd A. Wennlund, managing director of Northern Trust Co.'s Northern Funds. "We didn't see a whole lot of money flow in, but we haven't seen see a lot of redemptions either."

The Investment Company Institute, a Washington-based mutual fund trade group, reported that investors pumped $4.9 billion of fresh money into mutual funds in March, compared with $6.4 billion in February.

Stock funds saw net new sales of $7.1 billion in March. By contrast, $2.2 billion was pulled out of bond funds.

The data measure new sales of mutual funds but do not include reinvested dividends or redemptions of fund shares. The figures do not show money that has moved within funds of the same group.

Penny Zega, head of the retail investments division of Seafirst Bank, in Seattle, said the strength of the stock market in recent months has given her stock funds sales a shot in the arm.

"Our March (sales) volume was double that of February and it was all equity funds," Ms. Zega said. "When the market broke 4000 customers said 'We need to be there."'

Over all investment product sales during the first quarter were up 100% over the same period last year. April sales volume remained strong but were relatively flat over March, Ms. Zega said.

She added that many of her customers that bought bond funds last year, are now buying certificates of deposit, or individual government and municipal bonds.

"Last year customers were buying for income, and now they're buying for growth - It's a different set of customers entirely," Ms. Zega said.

Lou Tasiopoulos, director of financial institution sales for Boston- based Putnam Investments, argued that retail investors always lag behind the markets when making investment decisions.

Putnam, a leading seller of mutual funds through banks, has seen a steady increase in sales so far this year, with volume up 25% in the first quarter, Mr. Tasiopoulos said.

Even though equity mutual funds continued to make up the bulk of Putnam's fund sales through banks in March and April, some investors are delving back into bond funds now that interest rates are not expected to rise further, Mr. Tasiopolous said.

A reason investors are still shy about bond funds may be that some consumers saw them as safe alternatives to CDs, but when the bond market tanked many were surprised they could lose money.

"Some folks might not have understood the potential for fluctuation was there when they bought (bond funds) and that's why you've seen the outflows," said Robert S. Kniejski president of Wachovia Investments, in Winston-Salem, N.C.

Wachovia's brokerage affiliate saw its overall mutual fund sales volume jump up between 25% and 30% in March over February. But funds sales were almost evenly split between bond and stock funds, Mr. Kniejski said.

Wachovia also increased it sales force since the beginning of the year, from 110 investment representatives to 135 as of the end of April. The extra presence of reps helped to shore up sales, Mr. Kniejski said.

Premier Bancorp's mutual fund sales picked up sharply in March. Sales of investment products were up 50% while mutual funds jumped 30% jump during March, said John de Graauw, head of retail investment services. The biggest seller is still fixed-rate annuities which make up 70% of all investment sales at the Baton Rouge, La.-based banking company.

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