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.