Bonds

It distresses me to watch on TV Gov. Gray Davis and former Gov. Pete Wilson making statements designed to deceive the voters on Prop. 39. They fail to say that the main purpose for the initiative is to reduce the requirement for passage of school bonds from the constitutionally required 66% majority to a 55% majority. They only mention the latter, implying that it will make it tougher to pass, since 55% is more than 50%. I think it's a shame and a crime that these two supposedly respected representatives of the people would deliberately do that.

California sold $441 million in general obligation bonds on Wednesday at the lowest yields in 12 years. But while the deal was described as a virtual sellout, investors demanded higher yields on some of the bonds than on similar issues sold Wednesday by Georgia. Analysts said the difference between the two states' bond yields showed that investors have grown a bit warier of California's credit-worthiness, in the wake of the state's deep recession.

Dennis Buchholtz spent a lifetime in the automotive industry, working at companies that supplied parts to America's automakers. For more than three decades, he spent his days casting iron dies used to turn sheet metal into fenders, roofs and hoods. He left the business with no pension and no 401(k) -- only an unshakable faith in the ability of Detroit's Big Three to survive even the worst of economic times.

The Federal Reserve Board and the stock market agree that the economy needs lower short-term interest rates to avoid recession. The bond market seems to think otherwise. Longer-term bond yields jumped late last week, either mocking or disapproving of the Fed's latest cut in short rates last Wednesday. The bellwether 30-year Treasury bond yield ended the week at 6.16%, up from 6.03% on Wednesday and the highest since Jan. 10.

Voters today will elect two Burbank school board members, decide whether to issue $112.5 million in bonds to improve schools, and choose whether to retain a 10% transient parking tax at short-term facilities like Burbank Airport. The general municipal election, which includes candidates for the Los Angeles Community College District, features four candidates competing for two seats on the local school board.

Bond mutual fund investors came through 2004 in much better shape than many had feared. Every category of bond funds posted a positive total return for the year, meaning interest earnings plus or minus change in principal, according to Morningstar Inc. Most bond categories had annual total returns in the range of 2% to 9%. The big surprise was that long-term interest rates fell for the year, even though the Federal Reserve began to raise short-term rates for the first time since 2000.

The long bull market in bonds lost momentum in the first quarter as fixed-income investors were whipsawed by fluctuating interest rates. Still, after three straight years of beating stocks -- something that last happened six decades ago -- bonds managed to do it again. Lehman Bros.' broad index of investment-grade U.S. bonds showed a total return of 1.4% in the first quarter, compared with a 3.2% decline in the Standard & Poor's 500-stock index.

California's bond rating was downgraded below that of every other state Tuesday by a major Wall Street rating agency, as lawmakers trying to resolve the state's financial problems faced growing resistance from powerful interest groups. Citing the state's prolonged budget impasse and its nearly empty treasury, Standard & Poor's lowered its rating on $46 billion in general obligation bonds, which investors usually consider one of the safest investments because they are backed by taxpayers.

The ideal holding period is forever, billionaire Warren Buffett used to say of stocks. Apparently, the same doesn't hold true for bonds. Berkshire Hathaway Inc., Buffett's investment and insurance company, reported Monday that second-quarter earnings more than quadrupled, buoyed by a well-timed bet on interest rates. Berkshire said net income rose to $1.18 billion, or $947 a diluted Class A share, from $278 million, or $226 a share, a year ago.

CB Richard Ellis Group Inc., the world's largest commercial property brokerage, borrowed $450 million Thursday at a steep interest rate as part of the firm's effort to stay solvent in the most punishing real estate market in decades. The Los Angeles-based company raised the money by selling new bonds. It is using the proceeds, along with $150 million that it raised last week by selling new common stock, to help pay off hundreds of millions of dollars in loans coming due this year and next.