fixed-interest paying certificates backed by mortgages of Bermuda residential properties.

The product, which is being brought out by FBS Capital, a wholly-owned subsidiary of First Bermuda Securities, is a local version of the FannyMae bonds in the US.

FBS Capital is offering 3,500 mortgage backed securities -- known as MBS Certificates -- at a price of $1,000 each to local investors.

The certificates, which are available in tranches of $1,000, pay the owner an interest rate of seven percent per annum.

Argus Insurance, which owns a stake in First Bermuda Securities, is guaranteeing the monthly payment of both interest and principal.

An application has been made for the certificates to be listed on the Bermuda Stock Exchange.

In order to offer the product, FBS Capital has purchased an undisclosed number of mortgages from an organisation whose name has not been released.

"We can assure investors that they are all performing, first mortgages,'' said a spokesman for First Bermuda Securities. "We have capitalised the company at $250,000, fully-paid, and we have insurance cover from Argus Insurance.

"In our opinion, this gives certificate holders more than adequate protection on their investment.

"We want there to be complete customer comfort and confidence in this product.'' He added: "The aim of the certificate is to provide investors with a highly liquid and secure fixed-income investment vehicle offering the maximum rate of return currently available by law.

"Because the certificates are tied to the repayment of principal and interest of a guaranteed, diversified pool of mortgages, they may be most appropriate for investors seeking a guaranteed monthly income stream yielding substantially higher returns than currently available on call or fixed deposits of similar liquidity.'' FBS Capital may, at any time, upon giving notice of 90 days, redeem all certificates at the then outstanding principal balance plus interest accrued up to and including the redemption date.

The average life of underlying mortgages held by FBS Capital is approximately ten years.

A prospectus has been prepared by FBS Capital and the $3.5 million offering closes at 3 p.m. on January 4, 1994.