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BANK OF NY: MUNI BOND BOOM EXPECTED UNDER CLINTON

 BANK OF NY: MUNI BOND BOOM EXPECTED UNDER CLINTON
 NEW YORK, Nov. 4 /PRNewswire/ -- The following was released today by


James J. Cooner, manager of the Tax Exempt Bond Management Division and senior vice president of the Bank of New York (NYSE: BK):
 What does the Clinton victory mean to the municipal bond investor? First and foremost -- taxes are going up for wealthier individuals. When taxes go up, municipal bonds become more valuable. Tax-free income received from municipal bonds is worth more in a rising tax environment.
 For most investors today, municipal bonds are the only remaining marketable investment that shelters income from the tax collector. At a 31 percent marginal tax bracket, 6 percent from a municipal bond equates to an 8.70 percent return from a bond subject to federal tax. If the tax rate jumps to 36 percent, 6 percent from a municipal bond is the same as a 9.37 percent taxable return.
 A 6 percent return from investment-quality municipals is readily obtainable today from bonds maturing in the 10 to 15 year maturity range. By way of comparison, to get a return over 9 percent from taxable bonds today, the investor would have to purchase lower-grade, below investment quality bonds.
 How about the supply of newly issued municipal bonds coming to market under the new administration? I believe we will see more bonds issued under President Clinton's administration. Municipal bonds would be an ideal vehicle to assist the funding of infrastructure projects -- an area that will likely be given more emphasis starting in 1993.
 In addition, I expect a more benign overall attitude towards tax- exempt financing. There is a very high probability for the revival of single-family mortgage revenue bonds and small industrial development bonds -- two categories of municipal bonds currently under curtailment. Municipal bonds can also be used to finance enterprise zones and inner- city improvements.
 Municipal bonds represent good value today. Current price levels do not reflect the high probability of tax increases. For example, "AAA" rated tax-exempt bonds are returning approximately 85 percent of the return in U.S. Treasury bonds. This would make the "break even" tax- rate between these investments equal to 15 percent -- far from today's 31 percent rate, and further still away from a possible 36 percent in 1993.
 There is a heavy supply of newly issued bonds. States and municipalities have been flooding the market with new bonds to refinance older bonds. This heavy supply of tax-free bonds makes for a current buying opportunity.
 Stick with bonds in the intermediate range (around 10 years). Returns in the intermediate range are only slightly less than returns from long-term bonds. However, the risk from increasing interest rates is lower for intermediate-term bonds. Also, tilt towards high quality. The returns between high-quality and low-quality bonds is modest.
 Buying high-quality bonds today does not result in an appreciable reduction in returns.
 -0- 11/4/92
 /CONTACT: Steven Bruce or Rick Stockton of The Abernathy/MacGregor Group, 212-371-5999, for the Bank of New York/
 (BK) CO: Bank of New York ST: New York IN: FIN SU: ECO


AH -- NY050 -- 2533 11/04/92 13:31 EST
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Date:Nov 4, 1992
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