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Easy money

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Illinois

* Bloomberg…

Buy Illinois bonds in May and sell when the budget crisis goes away.

It’s almost as catchy as the stock market adage, and that simple advice is turning a nice profit recently. While many other fixed-income assets sputtered along, Illinois debt returned 1.56 percent in the last month, according to Bloomberg Barclays index data. On an annualized basis, that’s a 20 percent profit.

That monthly return is better than other U.S. states 1 and ranks ahead of just about any major bond market out there. For reference, here’s how some broad indexes fared last month.

* Global High-Yield: -1.51%
* Global Aggregate: -0.76%
* EM USD Aggregate: -0.73%
* U.S. Aggregate: 0.71%
* U.S. Treasury: 0.90%

And all investors had to do to lock in that return was bet that Illinois lawmakers would pass an acceptable budget. That’s what they did on Thursday, sending it to Republican Governor Bruce Rauner for his signature. […]

Investors clearly liked the news, with the yield on 10-year Illinois bonds tumbling on Thursday by the most in 10 months to 4.1 percent. The debt rallied for 10 consecutive days after the yield peaked in mid-May at 4.6 percent. At the time, that rate was higher than the one on 10-year securities from Greece, which, as everyone agrees, is junk.

posted by Rich Miller
Monday, Jun 4, 18 @ 9:14 am

Comments

Such shenanigans.

I challenge any rating agency to put a percentage probability on the chance of SOI defaulting on any GO debt payment in the next five years.

Such an analysis would have to include current Illinois law, ongoing approps., exponential debt coverage by revenue and payment history.

The probability would be somewhere around “zero.”

You can kick pension contributions and payments to vendors down the road. Not GO debt payments.

Comment by wordslinger Monday, Jun 4, 18 @ 9:24 am
Can the various Illinois pensions invest in those bonds?

Comment by Da Big Bad Wolf Monday, Jun 4, 18 @ 9:25 am
Other than destroying our state’s rating and bankrupting dozens of organizations depending on Illinois - it was easy.

Comment by VanillaMan Monday, Jun 4, 18 @ 9:37 am
High risk = high return. We still have by far the lowest rated GO bond in the nation

https://www2.illinois.gov/sites/capitalmarkets/Pages/Credit-Specific-Information.aspx

Comment by Texas Red Monday, Jun 4, 18 @ 10:37 am
=Can the various Illinois pensions invest in those bonds?=
Hopefully they’ll continue to contribute as to not miss out on investment interest like we (SOI) have for the last several decades.

Comment by Deadbeat Conservative Monday, Jun 4, 18 @ 10:40 am
This is why many super-rich people love and encourage Illinois’ anti-tax fanatics. What great game they have going on.

Comment by James Knell Monday, Jun 4, 18 @ 10:46 am
word, in short, yes.

Comment by Arthur Andersen Monday, Jun 4, 18 @ 10:51 am
Sorry-big bad wolf, in short, yes.

Comment by Arthur Andersen Monday, Jun 4, 18 @ 11:02 am
Word is it. Peace and out.

Comment by flea Monday, Jun 4, 18 @ 1:04 pm
–High risk = high return. We still have by far the lowest rated GO bond in the nation–

What a scoop, stop the presses.

Explain the nature of the “high risk.”

Comment by wordslinger Monday, Jun 4, 18 @ 1:25 pm