With the Republican convention set to kick off tonight in Houston, the credit markets have reason to be happy about the four years since the party's last conclave. Interest rates have moved decisively lower.

* Since August 1988, the three-month Treasury bill rate dropped from 7.05% to 3.08%, a decline of almost four percentage points.

* The yield on the 30-year Treasury bond dropped from 9.44% to 7.35%, a decline of slightly more than two percentage points.

* The Bond Buyer Index of 20-year municipal bond yields dropped from 7.85% to 6.05%, a decline of 180 basis points.

Borrowers have seen their costs decline, and investors have seen their total returns on fixed-income securities rise during the quadrennium since George Bush won nomination in New Orleans. These four years may have been a disappointing time for the economy, but it has been a good time for fixed-income securities, a kind of yea-boo period with inflation coming under better control and business activity remaining disappointingly sluggish.

Seventy-eight days remain until Election Day on Nov. 3, and the bond market faces a number of important questions that won't be answered until then or even later. Can George Bush overcome his lag in the opinion polls in 1992 the way he did in 1988? If he does win reelection, will his second term mean still lower interest rates? If Bill Clinton defeats Mr. Bush in November, will his "Putting People First" economic program revive the economy and inflation too?

It's our assessment that Mr. Bush's record with the domestic economy is so poor that he will lose, despite the best efforts of his friend Jim Baker, a highly effective politician who has left the State Department to rescue the President's campaign. The Bush administration has superintended the slowest economic growth and the largest federal deficits of any administration since World War II, and that record will, in the end, unseat him.

But a Clinton administration is unlikely to bring four years as favorable to the credit markets as the four years gone by. Mr. Clinton, working with Democratic majorities of both houses of Congress, will attempt to revive the economy, increase investment, reduce the federal deficit, clean up the environment, and change the nation's health-care system - an ambitious agenda that Republicans say will mean more taxing, spending, borrowing, inflating. In essence, bad news for bonds by the time the next presidential race rolls around.

By August 1996, T-bills may climb back to 7%, the long T-bond to 91/2%, and the Bond Buyer Index to 8%.

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