SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
Getting a little better

Thursday, Feb 6, 2014

* Bloomberg

Illinois paid a 26 percent smaller yield penalty to issue $1 billion of general-obligation bonds, a sign investors are rewarding lawmakers for passing a bill to mend the worst-funded state pension system.

The sale included debt maturing in February 2024 that was priced to yield 3.81 percent, down from an initial 3.87 percent, according to data compiled by Bloomberg. The interest rate is 1.13 percentage points above benchmark 10-year municipal bonds.

* From the governor’s budget office…

The state received $5.5 billion in orders for the $1 billion offer from 109 individual investors, including six life insurance companies which are highly selective investors. The average interest cost (TIC) was 4.46%, compared to an average interest cost (TIC) of 5.05% the state achieved for a $1.3 billion bond offer in June, prior to the passage of the pension reform legislation.

The average interest cost on Thursday’s sale ran about 50 basis points – or half a percent — better than the spread from the 10-year MMD June sale.

The sale was so over-subscribed that the final amount of bonds sold was actually $1,025,000,000.

“We are gratified by the support investors have shown in the state and in the steps we have taken to stabilize Illinois’ finances, most notably the passage of the comprehensive pension reform plan,” said Illinois Director of Capital Markets John Sinsheimer.

- Posted by Rich Miller        


14 Comments
  1. - wordslinger - Thursday, Feb 6, 14 @ 2:59 pm:

    50 basis points from the last sale is a lot.


  2. - archimedes - Thursday, Feb 6, 14 @ 3:07 pm:

    The difference from benchmark is the important number. If the release is apples to apples to the last sale, it is saying 26% less yield penalty compared to the benchmark. So if the penalty is now 1.13%, it compares to 1.31% - or about 28 basis points.

    The remainder of the 50 basis points would be market driven.

    Lost of things go into this - but certainly the pension reform (which resulted in a Moody’s positive) is significant. But maybe more realistically it is worth 1/4%, not 1/2% on the yield.


  3. - Formerly Known As... - Thursday, Feb 6, 14 @ 3:23 pm:

    Good news, but to keep things in perspective we should remember Illinois still pays significantly more than other states. 2 or 3 times more than any other state, if IIRC.

    One step forward, with many more miles to walk.


  4. - Anonymous - Thursday, Feb 6, 14 @ 3:24 pm:

    And


  5. - Bill White - Thursday, Feb 6, 14 @ 3:45 pm:

    === 2 or 3 times more than any other state, if IIRC. ===

    Huh? A quote from the post . . .

    === The sale included debt maturing in February 2024 that was priced to yield 3.81 percent, down from an initial 3.87 percent, according to data compiled by Bloomberg. The interest rate is 1.13 percentage points above benchmark 10-year municipal bonds. ===

    3.81 minus 1.13 = 2.68

    3.81 / 2.68 = 1.42

    42% more ain’t good but it’s not 2 to 3 times more than the benchmark


  6. - Bill White - Thursday, Feb 6, 14 @ 3:47 pm:

    Paying 1.13 percentage points more is not good but it is very far away from “death spiral” territory.


  7. - walker - Thursday, Feb 6, 14 @ 4:19 pm:

    Bill White said it all.

    Progress slow, but sure.


  8. - Anon - Thursday, Feb 6, 14 @ 5:52 pm:

    Wby aren’t Republicans cheering at the progress? Oh, that’s right, it’s an election year.


  9. - Anonymous - Thursday, Feb 6, 14 @ 6:49 pm:

    @Bill White & @walker - you misunderstand me, or maybe I was not clear.

    As I said, Illinois === pays 2 or 3 times more than any other #state. === That is NOT the same as 2 or 3 times more than the benchmark.

    When you are in a bad financial situation, you have to pay more to borrow money.

    Our “credit spread”, or the “penalty rate”, is the amount we pay above the benchmark rate.

    Other states aren’t even close to us. In general, Illinois pays 5-10 times more than most other states do to borrow money.

    We even pay 3 times more than California, which is the next-closest state to us IIRC.

    Again, === One step forward, with many more miles to walk. ===


  10. - Formerly Known As... - Thursday, Feb 6, 14 @ 6:54 pm:

    Sorry, @Anonymous @6:49 was me.

    And to the post: It even says it right there in the article Rich linked to

    === Illinois also pays the highest borrowing costs among 17 states tracked by Bloomberg. Its yield spread is almost triple that of California, rated one level higher by S&P. ===

    So yes, we pay 2-3 times more than any other state.

    Today was progress. There is simply much more work to be done before we break out the champagne and get comfortable.


  11. - Bill White - Thursday, Feb 6, 14 @ 7:11 pm:

    http://en.wikipedia.org/wiki/Yield_spread

    === For example, if a risk-free 10-year Treasury note is currently yielding 5% while junk bonds with the same duration are averaging 7%, the spread between Treasuries and junk bonds is 2%. ===

    If the benchmark is 5% and CA pays 6% and IL pays 7% the IL yield spread would be 2, double the yield spread of CA.

    $100 at 5% = $5
    $100 at 6% = $6
    $100 at 7% = $7

    In this hypothetical the IL yield spread is double the CA yield spread however IL taxpayers would only pay 7/6ths as much interest as CA taxpayers, not 2 to 3 times as much.

    ===

    The difference between IL rates and the benchmark is $10 million per year per billion dollars borrowed. Bad? Sure.

    But a “death spiral” ??

    Not even close.


  12. - Howard - Thursday, Feb 6, 14 @ 7:57 pm:

    And so when SB1 gets tossed and it will, then what?


  13. - Formerly Known As... - Thursday, Feb 6, 14 @ 10:12 pm:

    I will say this, @Bill White - you sure do know how to make a person feel better about coming in last, lol.

    Have a good night.


  14. - Robert the Bruce - Friday, Feb 7, 14 @ 8:01 am:

    ==And so when SB1 gets tossed and it will, then what?==
    Duh. Assuming that happens, we’ll pay higher interest rates.

    We really should be borrowing as much as we can in this window of opportunity.


Sorry, comments for this post are now closed.


* Reader comments closed for the holidays
* Question of the day
* Feds sue after eight pregnant Chicago teachers discriminated against
* Caption contest!
* "La-La Land"
* Loose lips sink ships
* 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

          
        * Level Up! Baldur’s Gate II, Hearthstone, Borderlands, KOTOR
        * 6 Windows Phone apps with fantastic festive updates
        * Galaxy S6 Edge, Smartphone brand, Pebble comments & more – Pocketnow Daily Recap
        * The Week in iPhone Cases: Post-holiday treats for your new iPhone
        * The problem factory: Where Apple problems get manufactured
        * Samsung could be at work on a new Galaxy Tab (as well as another tablet)
        * Motorola Nexus 6 returns for order online

        * This Week's Top Downloads
        * Learn to Read Your Blood Test Results Before Your End-of-Year Physical
        * Sony Works for Third Day to Restore PlayStation After Attack
        * Samsung app aims to improve autistic children's social interactions
        * Re/wind: Sony Lets People Suffer Through “The Interview,” Google’s Wi-Fi Warfare and More
        * Keep Cookies and Brownies Fresh With a Slice of Bread
        * Shred Wrapping Paper Into Festive Packaging Material

        * So, you want the White Sox to get a lefty-masher...
        * Delmon Young signing one estimate of Dayan Viciedo's value
        * Hello, goodbye: 5 storylines that defined White Sox in 2014
        * A Foxmas Story: The feuds that opened the door for Nellie Fox
        * A visit from Sox Nicholas
        * White Sox share holiday favorites, memories
        * Where will the American League losses come from?

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


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

        Archives
        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


        * State Senator Talks About 2015 with New Governor..
        * Reeder: Quinn’s gift to campaign boss recalls s.....


        * Key developments in police-communities tension
        * Dontre Hamilton supporters rally in Chicago
        * Man accused of threats against Chicago police
        * Peoria man charged with toddler's beating death
        * Deaths in west Illinois city were murder-suicide
        * Governor's race tops 2014 list of Illinois stories
        * 5 charged after brawl shuts down Navy Pier
        * Services planned for Rockford slaying victims
        * Group sues Elgin over medical marijuana zoning
        * Golfers find body in creek on Illinois golf course

        * 5 charged after brawl shuts down Chicago’s Navy Pier
        * Watson files to run as write-in for Springfield Ward 5 alderman
        * Clemency applicants wait for Gov. Quinn's action
        * Illinois lawmaker band readies for inauguration
        * Quinn grants 179 Christmas Eve clemency petitions
        * Ex-Quinn aide's contract has extra severance protections
        * Jobless rate falls in all 12 Illinois metro areas
        * Topinka’s death renews talk of merging comptroller, treasurer offices
        * Blagojevich brother: I was used as ‘pawn’ to get then-governor
        * Toby Keith to headline Rauner’s inaugural concert at PCCC

        * Crain's publishes annual Book of Lists
        * A chat with the paper artist who designed Crain's unique 2015 Book of Lists cover
        * Quinn grants 179 Christmas Eve clemency petitions
        * Illinois road work takes break for holidays
        * Regulators to MF Global: Make customers whole over mishandled funds


        * Lakeview pot dispensary on hold; Tunney opposes Halsted location
        * Despite community pleas, CPS puts Dyett HS out for proposals
        * Gov. Quinn appoints longtime aide as Illinois comptroller
        * Watch: President Obama's year-end press conference
        * Rewriting the Sony cyberattack script
        * time for new course in Cuba
        * Are Rahm's numbers creeping up? New internals show him near 50
        * Obama guidance, press schedule, Dec. 19, 2014. Press conference
        * A whole lot of nothing from the City Council
        * Dozens gather at Logan Square eatery for ‘Serial’ podcast finale


        * Man breaks leg falling into open sewer in Orland Park
        * Chicago Ridge mall closes after 'report of shots fired,' fight
        * Man seriously hurt during Grand Crossing shooting
        * Starlin Castro's agent says Cubs player not involved in shooting in Dominican
        * Supporters of man killed in Milwaukee police shooting rally in Chicago
        * Boy shot 6 times Dec. 16 dies
        * Wyoming, Michigan governors urge Bill Bricker's extradition
        * No bail for man accused of having illegal gun, threatening cops, children
        * 2 men charged in Christmas Day robbery, shooting
        * Ukrainian Village bank robber sought


        * Listen to State Week - December 26, 2014
        * UI Faculty Association President Calls Salaita Report A Game Changer
        * Soda Tax Idea Coming Back In Spring Session
        * Toby Keith, Buddy Guy To Play Governor's Inaugural Concert
        * Long-serving Alderman Berny Stone dies at 87
        * WUIS-SJR Business Report The End of Times For Bel-Aire Motel
        * Local Book Club Provides Camaraderie For Vets
        * Agencies To Ask For More, Rauner Says ... Without Giving An Opinion On If They Deserve It Or Not
        * Rauner Favors Merging Comptroller, Treasurer. Just Not Now.
        * Rauner Named Nation's Most Influential Pension Figure


        * Jon Gray Noll: James Lewis’s commitment to justice for all above reproach
        * Andy Shaw: Unbridled campaign spending prompts new approaches
        * Bernard Schoenburg: Lobbyist Sias new speaker of Third House
        * Quote of the Day: Sunday, Dec. 28, 2014
        * 5 charged after brawl shuts down Chicago’s Navy Pier
        * sally Walker and Tracy Cross: Putting talent on the legislative agenda
        * Quote of the Day: Saturday, Dec. 27, 2014
        * Watson files to run as write-in for Springfield Ward 5 alderman
        * Derrik Gay: Torture makes us weaker, not stronger
        * Another view: America’s best days ahead or behind?


        * Sunday Conversation: Brock Spack
        * Giant ketchup bottle still unsold 5 months later
        * All-Area Football: Final N-G rankings — Tuscola at top
        * All-Area Football: Final standings
        * Final area prep football statistics
        * Efficiency Stats - Kennesaw State
        * 5 charged after brawl shuts down Navy Pier
        * Kwanzaa helps community prepare for New Year
        * Deaths in west Illinois city were murder-suicide
        * Kennesaw State Pregame 12-27-14


        * Rockford Jefferson passes up Huntley
        * Montini regroups, advances to semifinals
        * Cary-Grove weathers big Carmel comeback
        * AirAsia plane with 162 aboard missing in Indonesia
        * Images: championship game of the Hinkle Holiday Classic

        * Mr. Bost goes to Washington
        * 2014 in review: Highland Park and Deerfield
        * Ousted Democratic congressmen in southwest...
        * Republican David Brat Wins Virginia’s 7th ...
        * Question of the day - Golden Horseshoe Awards
        * A Tale of Two Electorates
        * Bost Readies to Join Congress
        * Bob Dold
        * Newly Elected Texas Congressman Hails From...
        * Rep. Bob Dold

        * Natural on the Hill...
        * Durbin asks for help battling heroin epidemic...

        * TMA Applauds Passage of National Strategic......
        * DC Online Publication Says Rep. Bustos Con......

        * Warming Centers Available/Heating Requirements
        * Congratulations, Ald. Pawar
        * The [Monday] Papers
        * The Weekend Desk Report
        * GOP offers Obama lump of coal for Christmas; nine Illinois plants affected
        * Di Leo: Josef Stalin and the Problem of Political Opposition
        * Illinois ranks #50 in best-run states
        * Kirk expected to increasingly vote with Democrats as he prepares for 2016 election
        * Study finds Chicago red light cameras raise cash, don't really reduce injuries
        * Sen. Syverson says Quinn's lame duck session is "ethically-questionable"


        * Governor Quinn Statement on Christmas
        * Governor Pat Quinn Takes Clemency Action
        * Governor Quinn Urges People Across Illinois to Support “Operation Hero Miles” this Holiday Season - Governor Makes Christmas Eve Donation to Program That Helps Injured Servicemembers Connect with Family
        * IDHR Reminder: Law Protecting the Rights of Pregnant Women in Illinois Takes Effect January 1st
        * Governor Quinn Departs for Annual Trip to Visit Wounded Servicemembers - Will Deliver Holiday Cards to Servicemembers on Monday; Encourages People to Donate Miles and Help Reunite Servicemembers with Families




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