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Bond Accountability Commission 2 Recommendations Page 58

16, 2008. Yields on tax-exempt securities rose sharply in relation to yields on U.S. Treasury securities. Those impacts are illustrated in the following long-term graph of tax-exempt and U.S. Treasury yields—

The Interest Rate On Tax-Exempt 20 Year Municipal Bonds Is Almost Always Lower Than The Rate On Taxable 30 Year U.S. Treasury Bonds

Interest Rate

Rate Differential

28%

3.0%

26%

2.0%

24%

1.0%

22%

0.0%

20%

-1.0%

After Recent Dramtically Atypical Market Conditions, Interest Rates for the Bond Buyer 20 Year Index have Returned to a More Traditional Relationship Relative to 30 Year U.S. Treasuries

18%

16%

-2.0%

-3.0%

Gap Between Bond Buyer and U. S. Treasuries 14%

-4.0%

12%

-5.0%

10%

-6.0%

30 Year U.S. Treasury Rate 4.66% as of March 11, 2010

8%

-7.0%

6%

-8.0%

4%

-9.0%

Bond Buyer 20 Year Municipal Index 4.33% as of March 11, 2010

2%

0% Jan-05-84

Nov-14-85

Sep-24-87

Aug-03-89

Jun-13-91

Apr-22-93

Mar-02-95

Jan-09-97

Date

Nov-19-98

Sep-28-00

Aug-08-02

Jun-17-04

Apr-27-06

-10.0%

Mar-06-08

-11.0% Jan-14-10

The 20-Bond Index consists of 20 general obligation bonds that mature in 20 years. The average rating of the 20 bonds is roughly equivalent to Moody's Investors Service' Aa2 rating and Standard & Poor's Rating Service AA. The 30 Year Treasury bond yield is as quoted by The Bond Buyer.

A “flight” to the safety of U.S. Treasuries, together with investors’ loss of confidence in bond insurers and rating agencies, led to facts and circumstances in which 10-year triple-A municipal securities yielded at one point as much as 186.1% of the

BAC2 Recomendations Final 04062010