state bonds

From: BOB FORD <BOB_FORD@compuserve.com>
Subject: state bonds
Date: Mon, 11 May 1998 12:07:50 -0400

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>Date: Thu, 07 May 1998 12:46:19 -1000
>From: Don DeLair <chassen@hawaii.rr.com>
>Subject: State G.O. Muni bonds

> currently own a lot of zero coupon Hawaii State General obligation
>bonds. They are laddered in increasing amounts maturing every year from
>2002-2009. Moodys recently downgraded the state of Hawaii from AA3 to A1=
=2E
>I am a retired senior citizen, and these bonds represent the bulk of my
nest egg.
>My concern is ---How safe are the bonds? I do not plan on selling any of=

these
>bonds prior to maturity. My main concern is what are the chances of a
>DEFAULT. I have considered diversifying , but the bids I can get at reta=
il
are
>awful. I would much prefer to hold them to
>maturity but also need some peace of mind.

>Are State G.O.s generally safe. Is A1 to low a rating to feel comfortabl=
e
with.
>I am pulling my hair trying to make a decision. Should I hold or take a
bath by
>trying to sell?

>Any help/comments would be greatly appreciated.
>Don

DON

There are only one type of bonds that are generally considered to have NO=

RISK
OF DEFAULT.  These are U.S. Treasury bonds.  All other bonds have some
degree of risk of default.  As with most investments, the greater degree =
of
risk, the
greater return on investment.  I am not 100 percent sure but I believe
there has
never been a state default on it's bonds since the civil war.  If I am
wrong, I hope
someone on this list will post a correction.  =


Bonds rated A1 are still investment grade bonds which means they are
generally
considered safe.  However safety is not the same for everyone.  Only you
can
decide if you need the absolute safety and lower yield of U.S. Treasury
bonds.

I would feel comfortable with my nest egg in state bonds rated A1.  If yo=
u
do not
fee comfortable with A1 rated state bonds, you must decide how much it is=

worth
to you to get bonds with a higher rating.  Unless you get U.S. Treasury
bonds,
there is no way to know if the AAA rated bonds of today will retain that
rating.

If you need more information, let me know.

GOOD LUCK
BOB FORD
BOB_FORD@COMPUSERVE.COM
BOB FORD


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