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* Remember these predictions from just last week about Illinois’ bond sale?…
“They’re definitely going to have to pay a higher yield,” said Dan Solender, head of municipals at Lord Abbett & Co. in Jersey City, New Jersey, which manages $17 billion of the debt, including Illinois bonds. “They’re going to be penalized compared to other bonds of similar ratings.” […]
Illinois is going to have to price the deal “pretty attractively” in order to get a good reception from investors, said Dan Heckman, a senior fixed-income strategist in Kansas City at U.S. Bank Wealth Management, which oversees $130 billion.
* The sale was today. Did the bond vigilantes win the day? Nope…
Hi, Rich –
Wanted to pass along this info on today’s bond sale.
The winning bidder of today’s $480 million General Obligation bond sale was Bank of America Merrill Lynch at a rate of 3.99%. This is a better rate than the last four tax-exempt GO bond sales. The previous rate of the last GO competitive bond sale in April 2014 was 4.08%.
The state received nine bids in today’s competitive bid. The bonds were issued to continue Illinois’ road construction programs, which are essential to maintain public infrastructure, improve public safety and create construction jobs.
Thanks,
ck
* One significant caveat…
The 161-basis-point spread over MMD’s scale is down from Illinois’ 170-basis-point spread in the secondary muni market heading into the bond sale. But the spread is wider than the 111 basis point spread for 25-year bonds in Illinois’ last sale in 2014.
So, the spread is definitely wider, but we saw plenty of bids and a rate that isn’t crazy high, considering.
Rauner and his team speak their language, so that probably helped. Not to mention that bond payments are made first. We’ll have to go a very long time without a budget before those payments are endangered.
posted by Rich Miller
Thursday, Jan 14, 16 @ 2:02 pm
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Hi, ck-
“The winning bidder of today’s $480 million General Obligation bond sale was Bank of America Merrill Lynch at a rate of 3.99%.”
Is that better than the 1.4% ROI of the Turnaround Agenda?
Asking, for a state.
Thanks!
ow
Comment by Oswego Willy Thursday, Jan 14, 16 @ 2:06 pm
==This is a better rate than the last four tax-exempt GO bond sales.==
The markets don’t seem concerned at all right now.
Comment by Formerly Known As... Thursday, Jan 14, 16 @ 2:11 pm
==Bonds due in 2034, 2037, 2038, and 2039 were insured by Assured Guaranty Municipal Corp, which boosted their ratings to AA from A-minus with S&P and to A2 from Baa1 with Moody’s Investors Service.==
Almost sounds like a vote of confidence.
Comment by Formerly Known As... Thursday, Jan 14, 16 @ 2:13 pm
The bills will always come due.
Comment by Precinct Captain Thursday, Jan 14, 16 @ 2:29 pm
Wait, a better bond deal despite Rauner’s gross mismanagement of the state? Weird.
Comment by Junior Thursday, Jan 14, 16 @ 2:33 pm
PC - these borrowings are indeed kicking the can down the road, but lower rates will at least make the cleanup a bit easier.
Comment by Junior Thursday, Jan 14, 16 @ 2:35 pm
- Junior -
Do you understand how Illinois Bonding works…
===Not to mention that bond payments are made first.===
As long as there’s revenue coming in, Bonds get the revenue first. First.
Investing in Illinois Bonds are safe, they are at the front of the line to get paid.
Please, learn.
Comment by Oswego Willy Thursday, Jan 14, 16 @ 2:37 pm
Willy, why do your responses so often have little to do with the post I’ve written?
Comment by Junior Thursday, Jan 14, 16 @ 2:40 pm
- Junior -
It has everyting to do with you comment.
The rate, and the deal for the Bonds, the Bond Buyers know, that Illinois requires Bonds be paid first.
It makes Illinois Bonds attractive.
Ya kinda missed that. If you were ignorant to that, I’m letting you know that management, good or bad, is swell, but a guaranteed position of First in state monies is real attractive to Bond Buyers.
Please, learn.
Comment by Oswego Willy Thursday, Jan 14, 16 @ 2:45 pm
Oh - phocion - …
Comment by Oswego Willy Thursday, Jan 14, 16 @ 2:46 pm
Willy - is that new? The point is that Illinois didn’t have to pay a higher rate than in previous deals. Actually it seems the rate is lower. Despite the chaos foisted on the state by your fellow republican. Apparently the bond markets are not (yet, at least) as concerned about the financial future as some on the board.
Comment by Junior Thursday, Jan 14, 16 @ 2:55 pm
- Junior -
I don’t think it’s “new”… Maybe you should hit the search key and see when all that “Bonds paid first” thingy is and where I “found” it.
===The point is that Illinois didn’t have to pay a higher rate than in previous deals. Actually it seems the rate is lower. Despite the chaos foisted on the state by your fellow republican. Apparently the bond markets are not (yet, at least) as concerned about the financial future as some on the board===
In “Casino” it’s said.
“You get paid first, you get paid best”
Illinois Bonds are required to be paid first, so, with revenues coming in, bonds get paid first.
Guaranteed. No matter who is governor.
That’s attractive, no matter the leadership. Paid first.
Comment by Oswego Willy Thursday, Jan 14, 16 @ 3:02 pm
= is that new? =
In the Constitution. “Full faith and credit.”
Comment by Dirty Red Thursday, Jan 14, 16 @ 3:05 pm
Dirty, I know that bonds get paid first. I also know that the previous bond deals rules. Therefore, the rule about bondholders being paid first is not the reason Illinois got a better rate this time than last.
Comment by Junior Thursday, Jan 14, 16 @ 3:21 pm
Meant….previous bond deals had the same terms.
Comment by Junior Thursday, Jan 14, 16 @ 3:22 pm
===Wait, a better bond deal despite Rauner’s gross mismanagement of the state? Weird.===
If ya knew they’re paid first, you’re trolling for a false cause to the effect.
- Junior -, you’re lacking.
Comment by Oswego Willy Thursday, Jan 14, 16 @ 3:28 pm
Nice to see Mr. Rauner borrowing just like every other governor.
Comment by Michelle Flaherty Thursday, Jan 14, 16 @ 3:31 pm
Junior, these bonds are more expensive relative to the prevailing market, as pointed out by the spread. Illinois got a worse deal than last time. If Illinois had gotten the same spread, which is the true risk measurement here, these bonds would have been issued roughly half a percent, or 49 basis points, lower. 3.99% is nice, but not because of anything Illinois is doing, rather, it could have been 3.50% if the risk looked similar to 2014.
Comment by CD Sorensen Thursday, Jan 14, 16 @ 3:32 pm
Illinois got a better rate this time because folks are looking to invest in something other than equities right now. The spread is fifty basis points higher than the last deal. The affordability in absolute terms has everything to do with current market conditions and very little to do with how we’re managing these days.
Comment by Juice Thursday, Jan 14, 16 @ 3:34 pm
Maybe the rate wasn’t “off the chain,” because the buyers know there is more to come, $5B? $9B. /s
Comment by cdog Thursday, Jan 14, 16 @ 3:40 pm
Some might have noticed the stock market is in the dumps..the hedge funds have crashed high yield (i.e. junk bonds) and AB InBev got $100 billion offers for $40 billion offerin’
Bonds are the safe harbor
Comment by Annonin' Thursday, Jan 14, 16 @ 3:45 pm
@CD Sorensen- Thanks for the concise and easy to understand explanation!
Comment by JS Mill Thursday, Jan 14, 16 @ 5:12 pm
Wordslinger and AA, (and all potential fools… er… Investors): Here’s an idea:
Let’s create a secondary market in instruments combining the risks in the insurance policies backing up these kinds of bonds. Maybe we can create a “troubled-state-bond bubble”, and all skate for a while.
Comment by walker Thursday, Jan 14, 16 @ 6:42 pm
walker, that is seriously not a bad idea, especially if run with OPM. Look how good AIG was doing before it was doing really bad.
To the Post, Annonin’ is spot on with no decoder ring required!
Comment by Arthur Andersen Thursday, Jan 14, 16 @ 7:36 pm
Thanks governor for the competitive bid process.
Comment by Blue dog dem Thursday, Jan 14, 16 @ 9:13 pm
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Comment by targeted email lists Wednesday, Jan 20, 16 @ 11:58 pm