Clinton Victory Prospects Aid Munis : Securities: With his plan to raise taxes on the rich, the bonds’ tax-free properties become attractive.

Not all bonds are suffering the Clinton Willies, an ailment marked by fear of big deficits and higher inflation.

With most of the focus this month on the Treasury market’s plunge, one fixed-income investment--tax-free municipal bonds--actually seemed to grow more attractive, particularly for wealthier Americans, who could face some pain under a Bill Clinton presidency.

As the likelihood of a Clinton election victory has grown, traders fear that his economic stimulants will boost federal spending and raise consumer prices. Both can erode the value of bonds.

By late last week, yields on long-term Treasuries had shot up nearly 0.15% over several hectic days of worrying.

Municipal bonds, which usually move in tandem with Treasuries, also dropped in value. However, they did not drop as much.

Experts say the reason stems partly from another part of Clinton’s economic plan--boosting taxes on the richest Americans.

Shearson Lehman Bros. Inc. this month mailed out a “white paper” to investors headlined “Municipal Bond Bonanza.”

“We don’t want to mislead anyone that if they buy munis now they will make money. But it makes sense for people currently in the market for these types of investments that they will see more of a reason to buy them under a Clinton presidency,” said Terry Tracy, first vice president in Shearson’s municipal bond department.

The Wall Street brokerage noted that municipal bonds are cheap because of a flood of new municipal issues, which has let investors shop for the best prices.

Those low prices are particularly meaningful for richer Americans.

Presently, top earners pay 31% of their adjusted gross income in federal income taxes. For such taxpayers, buying a long-term municipal bond yielding 6% means returns equivalent to a taxable bond yielding 8.69%.

Right now, munis seem enticing, since it’s tough nowadays to find a top-rated taxable bond with a yield that high. But under Clinton they could grow even more attractive.

Clinton proposes raising the top marginal tax rate to 36% for taxpayers earning more than $200,000 a year. For individuals in this bracket, Shearson points out, that same 6% municipal bond would have the taxable equivalent yield of 9.375%.

The equivalent returns are even better for millionaires, whom Clinton wants to slap with a 10% surtax. They would see the taxable equivalent yield of their 6% muni climb to 9.93%, Shearson calculates.

Since municipal bonds often are exempt from state and local income taxes as well as federal, the benefits could be even greater in high-tax states.

Richard Ciccarone, director of tax-exempt, fixed-income research for Kemper Securities Inc., notes that in high-tax states such as New York, California, Connecticut and Massachusetts, the taxable equivalent yield could exceed the 10% level and even approach 11%.

The favorable scenario for muni investors illustrates that the likelihood of a Clinton presidency is not the single-minded bond monster the Treasury market seems to have painted it.