SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
Why did Illinois yank its bond issue?

Thursday, Jan 31, 2013

* Reuters looks into why Illinois withdrew its bond issue this week

Illinois yanked a $500 million general obligation bond issue slated for Wednesday because of credit concerns that could boost its borrowing costs, in the latest financial blow to the state, which has failed to fix its bloated public pensions.

Investment banks that planned to bid on the debt indicated investors would demand higher yields on the 25-year bonds, said John Sinsheimer, Illinois’ capital markets director.

“We were getting indications of higher spreads than we were anticipating,” said Sinsheimer, who declined to discuss specific spread levels. “We felt it was prudent to pull the deal for the time being.”

Illinois is already faced with the highest spreads - 137 basis points in the latest week - over Municipal Market Data’s benchmark triple-A scale among states and cities tracked by MMD, a unit of Thomson Reuters. By contrast, the spread for California, another low-rated, high-debt issuance state, was only 48 basis points in the week ended Jan. 25. […]

Tim McGregor, director of municipal fixed income at Northern Trust, said the state probably would have had little difficulty selling the bonds on Wednesday “with a little bit of yield” given low supplies of debt in the $3.7 trillion municipal market and yield-hungry investors. He added that if Illinois wants to attract lower rates in the market, it needs to fix its finances, particularly pensions.

“Spreads won’t tighten just because they want them to tighten,” he said, adding the state needs to impress the market by tackling pension reforms.

Either way, it was probably prudent to let the furor over the rating reduction die down for a while.

- Posted by Rich Miller        


17 Comments
  1. - wordslinger - Thursday, Jan 31, 13 @ 11:08 am:

    It’s not a good week to issue muni debt. If you can wait, it’s good to wait.


  2. - Dan Johnson - Thursday, Jan 31, 13 @ 11:16 am:

    There’s got to be a better way to borrow money than depending on just the investment banks to underwrite bonds who then resell the bonds to individuals.

    To quote Johnny Depp in Blow: “We’re getting middled.”


  3. - walkinfool - Thursday, Jan 31, 13 @ 11:26 am:

    ==we were getting indications of higher spreads than we were anticipating==

    Seems pretty simple and clear.

    Word: Is there reason to think it will be better in the next few weeks?


  4. - Ahoy! - Thursday, Jan 31, 13 @ 11:26 am:

    Has anybody done any reporting on how the State is using its bonds? I remember when the Capital bill came out, I believe in 2009 and the State was bonding all the new revues for road overlays, or put in another way, selling 20 year bonds for a 10 - 15 year maintenance activity. I wonder what the 25 year bond was for.

    The State also needs to be smarter on what it’s bonding for, especially with the higher cost of borrowing. Sometimes a pay-as-you-go system works to your benefit when borrowing is more expensive. Not saying all bonding is bad, just I question the ability of the State to make good decisions right now.


  5. - wordslinger - Thursday, Jan 31, 13 @ 11:31 am:

    Walk, don’t know. But yesterday, according to Bloomberg the muni market was showing the highest spreads since Jan. 8.

    If the stock market cools off a little bit, it should be better for the seller.


  6. - Jimbo - Thursday, Jan 31, 13 @ 11:31 am:

    Hey Ahoy,

    Remember ARRA? It wasn’t nicknamed American Rampant Repaving Act for nothing. The feds paid for most of those roads.


  7. - PQ's Primary Opponent - Thursday, Jan 31, 13 @ 11:45 am:

    Don’t those big city New York bankers understand that GOD and PQ are fixing everything?? Gee, I guess they dont see the same dynamic as us here in Illinois!


  8. - 47th Ward - Thursday, Jan 31, 13 @ 12:29 pm:

    ===It’s not a good week to issue muni debt.===

    Looks like I picked the wrong week to stop sniffing glue.


  9. - Dan Vock - Thursday, Jan 31, 13 @ 12:41 pm:

    Meanwhile, California got some good news. S&P upgraded its bond rating today: http://blogs.sacbee.com/capitolalertlatest/2013/01/california-climbs-out-of-sp-ratings-basement.html


  10. - Cook County Commoner - Thursday, Jan 31, 13 @ 12:49 pm:

    S & P today raised California’s bond rating to A based on a projected state surplus. Presumably,the underwriters and others in the know were aware of this before Illinois was to float its debt. If a profligate like California can actually or at least give the appearance of fiscal approvement, this would make Illinois paper look worse. Armed with this knowledge, the underwriters probably asked for extra spread.

    Pulling the bond sale was smart, but I don’t see things getting better.


  11. - UST - Thursday, Jan 31, 13 @ 1:28 pm:

    Bill Gross’ Pimco is starting a new bond fund “Dynamic Credit Income Fund” that will be buying junk status bonds. I suggest that Illinois give him a call.
    Lets face it. Based upon the returns of the Illinois retirement funds, market timing is not one of the state’s better achievements


  12. - Anyone Remember? - Thursday, Jan 31, 13 @ 2:21 pm:

    Cook County Commoner -

    California did two things: (1) the voters approved tax increases in the November 2012 elections, taking them from deficit to surplus; and (2) they “fixed” government pensions, as their Constitution does not say “the benefits of which shall not be diminished or impaired.”


  13. - Formerly Known As... - Thursday, Jan 31, 13 @ 3:18 pm:

    Voters passed the tax increase in California, as opposed to lame duck legislators in Illinois.

    It may not make much difference in one’s pocketbook, but Brown managed to get the public to support his tax increase.

    According to PBS, California also made a series of difficult cuts over the years:
    “With budget cuts coming like clockwork, the state’s vaunted college and university systems declined in offerings and in reputation. Schools suffered cutbacks in personnel and programs. Services for the poor were trimmed by $15 billion since 2008. State workers were furloughed…

    He (Brown) faced a $26 billion deficit and started making more cuts and changes, like transferring inmates from the state’s overcrowded prisons to county jails and closing down local redevelopment agencies, using the money for the state budget…”

    We are slowly beginning to do the same.

    Things may well get worse in Illinois before they get better.

    Ideally the Illinois economy will pick up quickly and help alleviate some of the funding crunch.


  14. - xylem - Thursday, Jan 31, 13 @ 3:52 pm:

    Reuters needs to do better reporting. They talk about the need to fix “bloated public pensions.” This is not pension “bloat.” It is insufficient government funding of reasonable pensions. We need to push back on the rhetoric here. Pensions are NOT bloated. The state government failed to fund the pensions like they were obligated to do.


  15. - Rich Miller - Thursday, Jan 31, 13 @ 4:02 pm:

    ===Reuters needs to do better reporting. ===

    I agree. They wanted to use a poll I commissioned which subscribers got today. No way.


  16. - Responsa - Thursday, Jan 31, 13 @ 4:17 pm:

    Madigan’s love letter was not just a shot actoss the bow to the unions, but was also a calculated message being sent to the bond`raters.


  17. - Shemp - Thursday, Jan 31, 13 @ 11:56 pm:

    Most pension amounts paid annually are anything but bloated. However, the age at which many begin drawing and thus the years of contributions vs the years of withdrawals are not in sync with reality in many cases.


Sorry, comments for this post are now closed.


* State ordered to pay providers for pregnant women, infants and children
* Club for Growth runs McCarter ad
* Because... Madigan!
* NFIB member poll: 88 percent want Rauner to keep pushing Turnaround Agenda
* AFSCME advances bill that Rauner admin says "we cannot afford"
* Kim Foxx launches first TV ad "Amen"
* 2nd Annual "Cocktails with Capitol Fax"
* Has a "new" counter-point to the Tribune emerged?
* Credit Unions Assist At Risk Youth
* Question of the day
* Why I fight
* Parsons scores rare and highly unusual Obama interview
* Dunkin's defense
* Civic Federation wants spending limits and tax hikes: "There are no easy stop-gap fixes"
* *** LIVE SESSION COVERAGE ***
* "Mike Madigan's favorite state Senator"
* #Winning!
* In the spirit of the times...
* SUBSCRIBERS ONLY - Today's edition of Capitol Fax (use all CAPS in password)
* Yesterday's blog posts

Support CapitolFax.com
Visit our advertisers...

...............

...............

...............

...............

...............

...............

...............


Search This Blog...

Search the 98th General Assembly By Bill Number
(example: HB0001)

Search the 98th General Assembly By Keyword

  
* Qualcomm outs Snapdragon X16 LTE modem that can reach 1Gbps speed
* Qualcomm paves the way for Gigabit Class LTE with Snapdragon X16 modem
* Qualcomm to release three new Snapdragon processors
* Qualcomm intros new Snapdragon Wear 2100 processor
* Samsung Galaxy S7 introductory price tipped at €700, S7 Edge to start at €800
* Bluetooth SIG releases Internet Gateway Smart Starter Kit for IoT
* Future Microsoft wearables may offer live food nutrition information

* White Sox reportedly considering Desmond
* Lefty-heavy rotation not a concern
* Melky: White Sox must play like family to contend
* White Sox remodel in big way this offseason
* White Sox ink Ishikawa to Minor League deal
* White Sox sign righty Latos to 1-year deal
* White Sox sign Mat Latos for one year, $3 million

...............


Main Menu
Home
Illinois
YouTube
Pundit rankings
Obama
Subscriber Content
Durbin
Burris
Blagojevich Trial
Advertising
Updated Posts
Polls

Archives
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004

Blog*Spot Archives
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005

Syndication

RSS Feed 2.0
Comments RSS 2.0
WordPress

Loading


* Rauner Pushes AFSCME To Make Decision On Negoti.....
* Brawl over high-stakes bargaining bill resumes .....
* Editorial: Illinois needs to get its funding on.....
* Letters: Syverson shares blame for Kishwaukee C.....


* Man found guilty of taking girl to Illinois for prostitution
* EXCHANGE: Richwoods swim team includes 4 sets of brothers
* Man wanted in Chicago area home invasion arrested in Mexico
* Lawyer may use insanity defense for mom accused in slaying
* Children's museum planners seek funding with public events
* Illinois gets extension to determine flooding damage
* SAT to replace ACT as college entrance exam in Illinois
* School security guard accused of sexually assaulting student
* AP Interview: Police shooting spurs state agency changes
* Illinois News Digest

* $45M and counting for $315M rail consolidation project
* Lawmakers making second attempt to send AFSCME talks to arbitrator
* President Obama returns to his political roots, connects with past friends, supporters
* Bill aims to create foundation to raise private money for state fairgrounds
* Obama returns to his political roots, connects with past friends, supporters
* Presidential visit notebook: Obama doesn't like horseshoes?
* District 186 misses out on construction bond program
* Vehicle emissions test notices suspended amid budget impasse
* Rauner: Bureaucracy is holding Illinois back
* Peoria's Par-A-Dice casino laying off 40, cites impact of video gaming

* What chefs eat for lunch
* An Aussie in strange land
* Best New Restaurants for Business 2016
* Chicago-area auto plants boomed in 2015. Can they keep it up?
* Chicago is risking too much by abetting the United-American duopoly at O'Hare


* Dear Abby: To wife’s chagrin, he sees his kids at ex’s home
* Georgia Nicols horoscopes for Feb. 12
* Clinton, Sanders clash over minorities, money — and Obama
* Stars score early and often, close in on first-place Blackhawks
* Sneed: Hillary making time for her buddies on visit to Chicago
* Sneed: Hillary making time for her gal pals in visit to Chicago
* Sweet: Kirk backers inject Rahm in U.S. Senate race
* Watch the Patrick Sharp tribute video shown at tonight’s Blackhawks game
* Patrick Sharp reaches milestone against Blackhawks
* Patrick Eaves has a hat trick after one period against the Blackhawks


* Illinois looks at banning drones near prisons
* 1 dead, 5 others hurt in shootings on West, South sides
* 2 CTA workers hurt during Yellow Line derailment
* Witness: Indianapolis man promised $10K for home explosion
* St. Alphonsus Liguori school to stay open after meeting funding, enrollment targets
* Chicago task force on police reform hears from residents
* Woman federally charged after escaping state charges in Endia Martin case
* Woman bilked Naperville man in 'arranged marriage' scam, police say
* Crest Hill man gets 39-year sentence for stomping wife to death
* Murder-suicide 911 call: 'Oh God! We better call'


* $45M and counting for $315M rail consolidation project
* Lawmakers making second attempt to send AFSCME talks to arbitrator
* President Obama returns to his political roots, connects with past friends, supporters
* Our View: Illinois officials should heed Obama's call for civility, compromise
* Bill aims to create foundation to raise private money for state fairgrounds
* Bernard Schoenburg: State GOP past $250,000 in support for Rep. Avery Bourne
* Eugene Robinson: Rubio's revealing loop
* Derrik Gay: Reducing fossil fuel dependence aids U.S. troops
* George F. Will: Break the teeth-whitening monopoly
* Obama returns to his political roots, connects with past friends, supporters


* Scammers out to get seniors' money
* Champaign native to lead UI's government relations efforts
* Danville struggling to hire minority and women police, firefighters
* Area update: Gibson City liquor, utility tax ordinances altered
* Don't go overboard
* Latin Grammy winners for children's music coming to Krannert on Saturday
* Danville, Rantoul districts get state OK for millions in interest-free loans for construction work
* SAT officially test of choice, a decision that frustrates many
* This day in history, Feb. 12, 2016
* Opportunity lost


* Kids liking math? Suburban teachers say LearnStorm challenge works
* Rollover crash closes Route 47 in Huntley
* Dawn Patrol: St. Alphonsus saved; Auto Show preview
* Dawn Patrol: St. Alphonsus saved; Auto Show
* European shares gain as bank sell-off abates, oil rebounds

* House lawmakers overcome hurdle on key tra...
* Rodney Davis talks funding with Bloomingto...
* The agency that fought Illiana gets a new ...
* Rep. Dold takes educational cruise down Ch...
* Lawmakers decry high turnover rate of VA h...
* CBD Oil, and politics
* Simon considering state Senate bid
* Killer Congressman Tom MacArthur trying to...
* Shutdown? State may not notice
* Rep. Bob Dold

* Lawmakers urge federal agency to build cam......

* Lawmakers urge federal agency to build cam......

* “The Driver’s Side” – News From The Motorist’s Perspective
* State Stops Sending Emissions Testing Reminders To Drivers
* Urlacher on the Concept
* One Week Left In Library Amnesty
* Foxx wants us to not look behind the curtain w/ Preckwinkle standing behind
* Explaining collective bargaining.
* The GOP moderate. His candidacy should terrify you.
* Cook County Clerk David Orr At Youth Voter Registration Event
* Clinton Gets Backing Of Congressional Black Caucus PAC
* President Obama Visits Springfield Urging Lawmakers To Compromise


* Emergency Management Officials, National Weather Service Encourage Winter Preparedness - November is Winter Weather Preparedness Month in Illinois
* Keep Your Family Safe This Winter - November through February are leading months for carbon monoxide related incidents
* Governor Takes Bill Action
* Illinois Department of Labor Director Hugo Chaviano Awards Governor’s Award for Contributions in Health and Safety to the Illinois Refining Division of Marathon Petroleum Company LP
* State Regulator Elected Treasurer of Interstate Medical Licensure Compact




Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller