Nearly three-quarters of senior tranches of the tobacco settlement bonds will default should cigarette consumption in the U.S. continue on its current rate of annual decline, says Moody's Investors Service in a report.

Specifically, the rating agency finds that if the decline in consumption continues at a 3% to 4% pace, as Moody's projects, bonds constituting 74% of the aggregate outstanding balance of all the tobacco settlement bonds will default.

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