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* Bloomberg…
The bond-market drop didn’t diminish demand in Illinois’s biggest debt sale in more than a decade.
As the state marketed $4.5 billion of bonds Wednesday, securities due November 2028 are being offered at a preliminary yield of 3.74 percent, according to four people with knowledge of the pricing who requested anonymity because the yields aren’t final. That’s lower than the 3.78 percent yield for the November 2029 portion of last week’s $1.5 billion deal, even though bond prices have slid since then.
Investors said the yields are alluring, with benchmark 11-year tax-exempt debt paying about 2.1 percent.
“The issuer still offers a tremendous amount of yield in a pretty yield-starved environment,” said Gabriel Diederich, fixed income portfolio manager at Wells Fargo Asset Management, which holds $41 billion in municipal bonds, including those issued by Illinois. “Outside of this little supply hump here with this deal, there really hasn’t been much muni issuance before this or likely in the weeks ahead.”
Part of the reason it’s a “yield-starved environment” is that most other states have their fiscal houses in order, unlike Illinois.
* The bonds are designed to pay off past due bills…
Of course, whereever the yields land in final wire on $4.5B deal it's A LOT better than 9% and 12% rates on some bills……and better than the 193bp and 185 spreads on 2016 deals and 273 and 292 spreads before budget passed.
— yvette shields (@Yvette_BB) October 25, 2017
* Yesterday’s backlog estimate…
posted by Rich Miller
Wednesday, Oct 25, 17 @ 12:47 pm
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It’s a disgrace and an outrage that Rauner waited even one extra day to refinance this debt. Someone owes the state over 100 million for this delay.
Comment by No Raise Wednesday, Oct 25, 17 @ 1:07 pm
No Raise - It is a disgrace that the 2018 fiscal budget was “balanced” in part by reducing payments into the pension system.
Comment by My thoughts Wednesday, Oct 25, 17 @ 1:11 pm
When the backlog rose in hopes of leverage for Rauner’s agenda failed, the state will have to pay for that gamble.
I’m glad the bonds are “out there”, that doesn’t mean I’m at all excited about the backlog or the rate now that needs to be paid.
It’s important that the state, maybe not the Governor, makes good on the bills that are owed to hard working people and the businesses that help Illinois try to be a functioning state.
It’s important. It’s important to recognize these bills need to be paid then find this way to pay to do it.
Comment by Oswego Willy Wednesday, Oct 25, 17 @ 1:44 pm
To purchase these bonds one must definitely subscribe to the greater fool theory.
Comment by Texas Red Wednesday, Oct 25, 17 @ 1:47 pm
Will Rauner propose some sort of bankruptcy component for Illinois so that the State can renege on these bonds, like he has on other State debts and contracts (e.g. pensions)?
Comment by Joe M Wednesday, Oct 25, 17 @ 2:00 pm
Buyer beware… from he Chicago Fed…
This article reveals that Illinois’s fiscal crisis has been a long time coming. From the late 1980s on, Illinois has spent more than it has collected in revenues. And while the typical U.S. state has also generally spent more than it has collected, Illinois’s overspending has outpaced the national average
since the mid-1990s, primarily through pension spending. How could Illinois get away with this for so long when it is required by law to have a balanced budget? Over the years, lawmakers used a variety of techniques to put off paying the bills, including underpaying into the pension systems. Such techniques can work for only so long, and Illinois is now coming to terms with over 20 years of poor fiscal performance.
https://www.chicagofed.org/~/media/publications/chicago-fed-letter/2016/cfl365-pdf.pdf
Comment by Texas Red Wednesday, Oct 25, 17 @ 2:16 pm
TR, your contempt for the rationality of free markets and capitalism is duly noted.
I bet you didn’t even realize that you were expressing that.
I’m sure you’re also unaware that investors have $8.9 trillion in the junk bond market, based on “guarantees” not even close to approaching Illinois’ bonds-get-paid-first statutes, which provide exponential coverage to Illinois securities.
And just on the NYSE, investors have poured $21.3 trillion into corporations with absolutely no guarantees on equity at all, unlike that provided by a sovereign, going concern with taxing powers.
But I’m sure you have stories on Illinois missing payments on GO bonds in its history. Just like the state has missed on payments to pensioneers, because it’s “broken.”
Dude, you’re not even in the ballgame here. Stick to parroting shallow partisan talking points. Leave finance to the grownups with skin in the game.
Comment by wordslinger Wednesday, Oct 25, 17 @ 2:53 pm
Texas Red, if he is rich, is missing a heck of an opportunity to buy the Illinois bonds. Despite their rating by the agencies, these bonds are as good as gold….which is why savvy investors gobble them up. As a practical matter, they are as safe as the highest rated state or municipal bonds out there, because bondholders get paid off the top, and because Illinois has plenty of wealth and can (and will) raise taxes when up against the wall. Texas Red apparently prefers “alternative facts.”
Comment by formerpro Wednesday, Oct 25, 17 @ 4:32 pm
The figure would be greatly reduced if the Cantroller would simply issue payments past due to Vendors as she has tons of cash to do so.
She is purposefully not paying Vendors.
She is racking up massive amounts of interest to all
Comment by sharkette Wednesday, Oct 25, 17 @ 4:46 pm
Well over 100 she is just not paying Vendors,.
Approved vouched since Dec 2016..
Since she took office, it is about 13M in interest she has caused.
Instead she has chosen to not pay Vendors for her personal Vendetta at the Gov.
Talk about kindergarten
And screech about interest costs.. She is causing, intentionally, not paying Vendors when she has the cash approved to do so.
Shocking, but true
Comment by sharkette Wednesday, Oct 25, 17 @ 4:49 pm
- sharkette -
That probably why with the bonds, a better way to pay who is owed what can be figured out… “Because… Liquidity”
Comment by Oswego Willy Wednesday, Oct 25, 17 @ 4:53 pm
Wow Sharkette, I’m pretty embarrassed for you. That is so patently and obviously false that I pity you for saying it.
It’s not true at all.
But hey I get it.
You’re scared to death about how bad Rauner
Is going to look when the
Debt transparency bill veto is overridden
Rauner is going to look so bad
Comment by Honeybear Wednesday, Oct 25, 17 @ 4:59 pm
sharkette, any proof for that allegation?
Comment by Arthur Andersen Wednesday, Oct 25, 17 @ 5:47 pm
==It’s important. It’s important to recognize these bills need to be paid then find this way to pay to do it.==
Most of the business people that I talk to are resigned that taxes will continue to go up. Has to. Some taxed entities, such as commercial real estate, are already tapped out.
Comment by Anonymous Wednesday, Oct 25, 17 @ 10:29 pm
Agree that Sharkette’s comments are way off base but disagree that the Debt Transparency Act will solve many problems because:
1)The true measure of a debt/liability is when goods/services are received by the state agency-not when a bill is received. The state’s accounting system is not equipped to provide this type of reporting. (Note that Comptroller Mendoza opted out of the statewide ERP accounting system that would have made the liability information readily available); 2) Vendors often do not send accurate or timely bills; 3) The information will not be audited and will be easily disputable. 4) It will be costly to accumulate the information and may exceed the benefits; 5) Errors from prior months will occur and will need to be corrected/restated and will result in confusion.
I don’t have a dog in the hunt on this issue but see problems implementing the Debt Transparency bill based on 36 years working in accounting at the Comptroller’s Office and another large state agency. Bill optics look good but it may be too much (bad) information.
Comment by justacitizen Thursday, Oct 26, 17 @ 9:12 am