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Now could be a good time to recoup some bond-holding losses

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If you're sitting with a safe-deposit box full of bonds purchased long ago and now showing a loss - what do you do? You could hang on grimly, but other options could leave more cash in your pocket.

Reader H. P. H. owns 47 bonds of six different companies with coupon rates ranging from 81/2 to 101/2 percent purchased years ago at or near par. Maturities range from 1986 through 2009. Current market value totals $29,620 for a loss of $17,380.

''Would it be wise to sell these and take a loss, then invest the proceeds to rebuy some deep discount bonds that would yield from 15 to 17 percent or put the cash into money market mutual funds yielding about the same? My tax bracket is about 12-plus percent. Could I use the loss to offset other income?''

A unique opportunity exists for the remainder of this year to take losses and build a lower cost basis for profits in following years.

Bonds are traded today much like stocks, and their prices vary according to general interest rates. Selling one batch of discounted bonds and buying others will not likely match or increase revenue. Assuming the same quality of bonds, a difference between bid and asked prices plus commissions (as much as $30-$45 on each bond) work against the trade.

For example, Reader H. P. H. owns 10 utility bonds, each with a market value of $635 maturing in 2009 paying a coupon rate of interest at 101/2 percent on original value. On the discounted price the $105 annual interest amounts to a current yield of 16.5 percent. Selling such a bond and buying a different one of similar quality would leave you with an asset worth $635, but out-of-pocket about $30, for a net yield of about $605. For a similar $105 current yield, a new bond would need to earn 17.4 percent to break even. Such trades of comparable quality bonds are unlikely on the same day. For a trade to generate the same income, either the risk would be greater - that is, a purchase of lower-rated bonds - or market conditions would need to change.

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