Oldest Muncipal Bonds EVAH!

In the midst of all of the financial turmoil, it's good to see that municipal bonds can be a good investment--especially if you bought them in 1868:

Anyone who has failed to keep track of a winning lottery ticket for all of 12 months may want to consider the efforts of 39 bondholders who have been safekeeping valuable, tissue-thin, New York City securities since shortly after the Civil War.

Next month, one of the bonds, issued in 1868 and thought to be one of the oldest active municipal bonds in the country, will come due. And the city stands ready to retire the debt incurred when Winston Churchill's grandfather came up with the idea of building a road to one of the nation's first racetracks, which he had opened in what is now the Bronx.

For 135 years, New York City has been dutifully paying 7 percent annual interest on the bonds, which financed construction of the road. On March 1, the owner of one of them is entitled to come forward and collect its face value: $1,000.

The 38 other bondholders have notes that will mature sometime between now and 2147, a mere 138 years away.

"It's not the best example of municipal debt management," said Jim Lebenthal, a bond specialist. "But 135 years of payment without missing a beat does underscore the safety record of municipal bonds."

It does put all of the panic about the Social Security Fund defaulting on its obligations in perspective--it's not going to happen. U.S. governments pay back bonds.

While I'm usually skeptical of 'win-win' situations, it does appear this was the case with these bonds:

...in the early years after the Civil War, when money stretched further, $70 a year in interest was a substantial sum, enough for a down payment on a middle-class house of good construction, which cost about $300.

"People who bought the bonds might say: 'This is really cool; generations of my family will benefit from this,' " said Richard Sylla, a financial historian and a trustee for the Museum of American Finance. "For the issuer, if you don't have to pay back the principal for 100 or 200 years, that's an advantage, too."

Well, I needed a happy finance-related story.