No Monster to Bondholders in It for the Income

Based on the portrayal in “The Bond Market Monster” (Nov. 20) by columnist Tom Petruno, prudent investors would have to be out of their minds to buy bonds. He forgets the large groups of individuals who invest their savings in bonds for income.

These investors just received a raise.

Mr. Petruno’s comments may be accurate for bond traders who measure success solely by their portfolio’s market value. They make profits by trading bonds, not by holding them.

However, most individuals own bonds for the income they generate, not for trading profits. They spend or reinvest the interest income and also reinvest the proceeds when the bonds mature. By reinvesting those proceeds at maturity in higher interest rate instruments, they now have more money to spend. Buyers of five-year U.S. Treasury notes will receive 48% more annual income now than at the beginning of 1994. These investors are not devastated, they are elated. Sure their bonds have fallen in value, but they do not have to sell and intend to hold their bonds to maturity. For most individuals, the true test of prosperity is how much they can spend. The recent increase in interest rates is welcome relief.

There is a huge population of retirees and others who have sidestepped the fluctuating equity markets to rely on the more secure return available in debt instruments such as CDs, notes and bonds. For the first time in a decade, they are getting relief from falling interest rates. They are now able to obtain higher returns from their investments, which I suggest is cause for celebration.

PATRICK J. EVERETT

Ryder, Stilwell

Investment Advisors

Los Angeles