Tobacco bonds have been on the defensive for several years now as the number of smokers dwindles. But for some yield-addicted investors, tobacco bonds are now seen as a buying opportunity despite their risks.

Most tobacco bonds are backed by payments made under the 1998 Master Settlement Agreement that requires tobacco manufacturers to make annual payments to states and other municipalities based on consumption. The past two years have seen drastic consumption declines that rating analysts say will force issuers to dip into reserves to make bond payments.

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