At the last refunding auctions in November, the yield on the 10-year Treasury notes had a 2.50 percentage point advantage over the comparable Japanese bond.

The bonds are popular because they offer yields that are as much as a half a percentage point higher than those of other comparable municipal bonds.

A comparable domestic corporate industrial bond with these ratings would have a yield that is about 40 or 50 basis points over the five-year Treasury notes, traders said.

Twenty-year New York City bonds paid investors 7.15 percent, compared with 6.30 for Nassau's comparable bond.

They still carry a big risk premium of nearly three percentage points over the rates on comparable German bonds.

One is that their coupons - higher than those of comparable bonds - put cash into investors' hands faster.

Another reason that premium bonds usually yield more than comparable bonds selling at par is less demand.

Analysts note that investors are now demanding higher yields from 10-year Treasury bonds than from comparable European bonds.

Because of the conversion feature, investors get about one-third less in the way of yield than they would receive on comparable bonds.

This option can be valuable to investors, but generally carries less yield than a comparable fixed-rate bond that does not carry this option.