(FORTUNE Magazine) – Worried by the slumping stock market, the sluggish economy, and rising bank failures? Hankering for the super safety of U.S. Treasury bonds? Don't buy just yet. There is a better haven for your cash, just as safe as Treasuries but much more munificent. GNMA securities (Ginnie Maes), representing mortgages that are backed by Uncle Sam, yield a percentage point or so over Treasury bonds of similar maturity. That spread has opened up lately as investors have flocked to Treasuries, driving their yields down relative to GNMAs. A. Alexander Fontanes, manager of the Liberty Advantage U.S. Government Securities Fund, calls the current 1.2 percentage point spread ''a window of opportunity'' for GNMA buyers. Ginnie Maes are securitized mortgage loans that have been bundled into packages, typically of $1 million or more, and are guaranteed by the Government National Mortgage Association, a government-owned corporation. Investors receive a monthly ''pass-through'' of the principal and interest payments made on the mortgages. The role of GNMA is to guarantee timely payment of interest and principal and to provide a liquid security that can be easily traded. As the chart shows, the rewards to investors have been exceptional. The stated maturity on a GNMA is usually 30 years, but the investor should expect it to have an average life of ten years or so because most mortgages are paid off before maturity. Mortgagors repay their debt, refinance, or default. Whatever the case, investors receive a lump sum for the remaining portion of the principal. The problem with prepayments is that they often come when investors want them least -- when interest rates are falling. Lower interest rates prompt homeowners to refinance; they also spur housing sales, causing mortgages to be retired. Ginnie Mae holders are then faced with reinvesting the payout at the prevailing lower rates. High prepayments plagued investors in the mid-1980s as interest rates fell ; and the housing market picked up. But prepayments have steadily wound down over the last four years. Says Michael Waldman, head of mortgage research at Salomon Brothers: ''Given the weak housing market, slower prepayment rates will continue for the next few years and lengthen the average life of the security.'' The minimum investment in a GNMA certificate is $25,000, which can be increased in $5,000 increments. If you buy a single GNMA certificate through your broker, Jaclyn Conrad, senior portfolio manager of Putnam U.S. Government Securities Income Trust, advises buying one that is based on a large pool of mortgages, say $5 million to $10 million. A $1 million pool holds only ten to 12 mortgages. Prepayment of just one would have a profound effect on an investor's return. To minimize prepayment risk it is also advisable to avoid GNMAs that carry high interest rate coupons, because the mortgagors will be looking to refinance at a lower rate. For a long-lived investment, stick to GNMAs that carry a stated interest rate close to prevailing rates. These current coupon GNMAs are now yielding about 9.5%. Selecting the right GNMA requires a lot of expertise, so most individual investors are better served by a GNMA mutual fund, with minimum investments starting at $1,000. Most pay a monthly dividend from the interest on the securities but funnel principal prepayments back into the fund for more GNMAs. Sales loads, which run as high as 6.9%, can take a big bite out of your return, so stick with no-load funds like Benham GNMA Income Fund or T. Rowe Price GNMA Fund. Both have turned in above-average performances and offer yields of 9% or better.

CHART: NOT AVAILABLE CREDIT: MERRILL LYNCH MORTGAGE CAPITAL CAPTION: YOU'LL DO BETTER IN GNMAs GNMA securities return more than Treasuries, with no credit risk. The mortgage on the Gnehms' home in Layton, Utah, is now part of a GNMA.