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<br />I . The Interest isles 'are often lower IChedule. Tram Manager BOb FIcker . ke~p' tile bond to maturtty. If the'
<br />I : . t),an what the government agency.' said that paymenlJ to bondboldel'l Investor buys a 2o-year general obll.
<br />: ,",auld have 10 poy to borrow from a ~.are now running obout 18 months gatlon bond with an 8.5 percent In-~
<br />; '. &ank. but Investors have an Incentive ;.. late. but that Ihey ShOU.ld.b. e back on '.' leresl rate, be will gel an InlereJtl
<br />..< Ipbuy municipal bonds because tbe; IChedulebyMayl984. """'.:.., '~". payment of $85 a year for each
<br />\'1 Interest earnings are exempt from. :". ........ " :..\'. :..':'. ",' $1.OOOlovested, regardless of what,
<br />I' '; federal,. aDd sometimes Ilale, In. :: But of more Immediate concern to..;. happellS to tbr. 1I0nd rallng or to the:
<br />. 'I :. come taxes. The bond. rallng bell" ',. bondholders thaD outrtght default II .bond's price In t~e markeL. . . -.' I
<br />i 'determine the Inleresl role and thuI' what can happen to Iha market val. ',' . I ': , ."..':
<br />i .Is extremely Important to the Issuing . ue of '8 bond backed by a govern., The Investor Is usually only con- .
<br />Ii agency and IlJ taxpoyers. A dltler.. menr agency whose bond rating has" cerned about the rating or the mar."
<br />'1 ence of one-fourth of a percentage been cut by. Standard " POOr'1 or :: iet value If be decides to sell tile,
<br />. . polnr In the Inlerest .rate on a $1 00. Moody's Investors Service, the two. . bond, Bond speclallslJ say the effect ,
<br />: million . Issue could cost the agency maJor. Wan Street b~nd.raUng agen.' of a rating cut on bond prices Is Dot!
<br />" an extra $250,000 a year In Interest '.clell...,.,..'....::" :i: .'1.;....; easily measured. The price of aDI'
<br />l' payments, or S5 million overtheUfe. :',. :'..;'. , . ~.,:. ..' ~ ..:.'.'.) .... ..;.: : Individual bond In the secondary
<br />j" of ~ 2o-year bond l!!Sue.,. ..... : -: '>;,', :Aboullwo months ago. S&P lowered market depends Dna number of tac" , .
<br />I ..... ... .... .'... ,...'. '.' Its rating of California's debt from . tors, InCluding the relative size ofthe :
<br />Some analysis ~ontend tho\, ..given. "M.plus" to "M" - belter than the .. government agency, the volume of I
<br />'1'" " . the economic pinCh governments are ,S&P. rallngs of only seven other : bonds outstaJldlng and the ext~nt to:
<br />1. facing, the prospect of a state or" slates and worse than the"MA" . . which the agency's financial dlfflCUI.!
<br />. local government borrower having. rallng the state had. as recenlly as'" ties became public knowledge be-.:
<br />. trouble meellng Its debt payments 0/1 1980. before the lax-cutllng eflects of ....:: fore any ra.tlng change. .'. .' 0 "j'
<br />. .. .' .. time sbould not be ruled ouL But at. .Proposlllon 13 began' to be telL Dur-, " . :' ,;:.. :".:.." c'.', : :;'..:
<br />',.'. the same lime. experts.say, certain' Ing all'of 1982, MOQdy'S lowered tlJ. .~ "All municipal bond credit rallngs I
<br />municipal bond .Issues ,continue" to '. credit rating of 263 municipal 'bond ': are based.OD the economy of the '.
<br />"1 :. f!lnk amoag the best and most se-Issuers, compared with only 62 rat-. .. region, the soundness of the'manage- I.
<br />'.:> >'. cureotlnyestmen!values......;., .': ',IngreducllonsIn 1981. , .. ..,".:ment of the public enllly and thetr! ..
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<br />'. . : :... ; . '.!n'e ~i~i:S\~ci~Y~;~~~~h;;~ ~~~/...~ Th~~' 'c~ts have not ~~;y' ~f;~ct~d"':! ~~~:t~~~n~'::I~ aJ~I~~;~a~:~c~i:~e~11
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<br />. ",' what they were tn the Great DeprlS- . the prtces of some bonds already In Hedrick. vice president and manag.
<br />. .. '. .!on," said Guy Wickwire. manager the market but they bave also raised . er of pu\>lIc finance at Crocker Na,
<br />'1 ' I ' 'of two municipal bond funds for Fl' the Interest rates government entl. . tlonal Bank In San Francisco... ., '
<br />, .' .' ..' -: d.ellty Group. a Boslon'based mutual,'. lies must pay on new debt Issues... ... '. . ..' '.. ..
<br />. '. . .: 'll~ i J~nd company. "And we don't anlld.:',TbIs can be good. for the Investor: Because of these Intangible factors,
<br />. .'. . ,.:' pate tbat tbe ~tralns will become that . looking for tax.fr,ee Income. but bad . he added. two Issues with the sam.e
<br />. . !': 5!!rJous. The long-term Investor Is for the state. school dlstrl~t or power' credit mltng may not trade at the
<br />. . pretty. much assured .of ul.tlmately : authority issuing the bonds. :::. . same. prJce. For: example, he says, . . .
<br />;'. ':1' .' . . b,elngpal<! orr.'~~: l" ':." ."'~' :: :.,:.: ..;' ..' :'.-~' f. f;-' . . " ';.... .." . :. both Virginia and Texas have .~_ ;'.;' '.7: .
<br />: ..'..'".. . . .' ....- .:,...: .'_ .... _ /. , I"or, a bondholder. the change In a bond rallngs; I!.ut because Tex,,!, has.',' :-- ;
<br />. '. ..\. :1~deed. even the.Jong.tenn'.hoJders~:,credlt'rallng of ,the government '.an $II. billion budget ,surplus. and.. :
<br />'. _ oJ the Palm Springs tramway bonds .. agency backing bls Investment Is issues few..bonds, Its debt Is. more',.. . .,
<br />. . .. . .' are be.lng paid off, allhough behind ,..usually of IIltle .concern If he plans to '. allractlve:to Investors than Is Vlrgll;l' :."
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<br />. ~ . . b~ .b~e'~ 95' Pe~ce';;i. 'or an' ~n~iiaj';,.:;n~~- ~l!ic{~ ~~In~~~r~~-:e:. '. ~e~~~i~~e:~~~~. 'hS:~: ~:::':t.; .
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<br />a~erage 012 percent:.., .--.",:" .'. search organlzatlon.). . ...,. . more Importanl'for Investors to pay:
<br />'1' ! .-.! . -; '.' '. ".:. ,,'...... ....(~ ; .,' " -.' :. ';:'" .'. more atlentlon to .who Isbacklng the .:
<br />; .11\ the tblrd quarter of 1948, tor In" . 1948-1954 :..................... up 1.3 percent bon~.they buy. .....' '.' .' ,.
<br />i st~nce. per:caplta Income totaled 1954.1960...............:...:.. up 1.5 percent., ',..1., "'. ,: .
<br />I~ S~,321, adjusted to 1972 dollara By',. 196o-I970..:~........._....up3.2percenl.:...lnvestors have to walCb for safety;
<br />. . th.e tblrd quarter of .1982, the In,com~ . ..1970.197:1 ...;;.........~...... up 1.9 percent . first, Ihe~. liquidity and then yIeld," ,
<br />';'1 .1 tD!al ~as up \0 S4,555. '::':; c....:. ..' ,1975'19.7.9 ,........ ..::...~... ..... up 3.0 percent ,she said. II used to be the otber -::ay ..
<br />.. " . . ... .. ... '.. " . . 1979.19g2 .......................up 0.3 percent around. You looke.d at yield first. ';.'
<br />", i! y~u.vegrownaccustomedtothepre- ..::: /.'::' ........:: ...-.... ,.' . ...... ':'
<br />'. dlctable cbuggJng along. said Gold- ' .
<br />stein, and count on that additional 2'
<br />~ : \0) percent each year. !lut.lt Is not
<br />i c~uggJng at that rate now: Since the
<br />:. first quarter of 1979; the rise In 'per-
<br />caplla income bas 'been only from
<br />'i . $~:5I1to $4.555,.. . . '. ..' ,
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