Standard and Poor's Corp., the bond rating agency, yesterday said it was suspending all ratings on those California bonds whose repayment revenues might be affected by Tuesday's overwhelming passage of the Jarvis property tax reduction initiative by California voters.

The action affects 251 outstanding bond issues totaling about $1.9 billion, which are now no longer considered to be of investment quality.

S and P said, however, that it was retaining its ratings for all California state and local bonds backed by full faith and credit of the borrowing entities, or by specific revenue streams. These bonds total about $16 billion.

"We've never done anything like this before," commented John D. Dailey, group vice president of S and P's bond division, referring to the blanket rating suspension.

"It's drastic action in California," he added. "Our function is not to cause things, our function is to mirror things, and you're talking about $7 billion dislocation in tax revenues. That's a lot of money."

"The cardianl rule on rating bonds is we must have adequate facts to make a rating judgement," Dailey said.

"But the situation in California is so confused that we did not feel we had enough information to make a professional judgement. The question is what will be the response on the local level of fiscal and monetary measures."

While S and P is retaining its investment grade classification for most California bonds, many of which are rated AAA, the highest quality category, Dailey said that it would be hard for either the state or any entities within it to raise new money in the municipal market until the situation in California becomes clarified.

"Nobody in California can sell a bond right now," Dailey said.

Moody's Investors Services, Inc., the other major bond raising agency, announced no action on he California situation yesterday.

Overall, the municipal bond markets were orderly despite the passage of the controversial California initiative. Bond prices dropped somewhat, but the decline was attributed to normal market factors, such as the large jump in the nation's money supply announced yesterday afternoon.

California state general obligation issues actually recovered about half of the 10 basis point - or $1 for every $1,000 face amount - loss they suffered on Wednesday in the immediate aftermath of the California vote.

And the issues that are affected by the rating suspension had already been heavily discounted in recent weeks in anticipation that the Jarvis initiative would pass.

Some bond market experts however predicted that the Tuesday vote could have a broad impact on other municipalitites and states when they come to the bond market for financing.

"The Jarvis vote has certainly made some people concerned about new issues," said Edmond N. Moriarity, director of bond trading for Merrill Lynch, Pierce, Fenner & Smith.

"There is no certain about the secondary market (where bonds are traded and resold after they are initially issued), but there is some concern about new issues because investors don't know what the voting on tax issues will be like in the future." Moriarity added.

The California vote is being heralded as the beginning of what could be a nationwide revolt by taxpayers.

Some market experts predicted that there will be a futher increase in the use of the revenue bonds - already increasingly popular - as a financing vehicle. Revenue bonds, as the name implies, are paid back from the specific revenues of whatever project is being financed, such as a toll road, a water treatment facility or a municipal golf course. They are not dependent on general tax levies.

The specific California bonds on which S. and P allocation bonds, lease rental bonds, general fund bonds without full faith and credit backing, and assessment district bonds. The ratings were retained on voter-approved general obligation bonds, on insured bonds, on pre-fund bonds backed by U.S. government obligations, and on revenue bonds.

S and P's Dailey said he did not know how long the suspension would last.