Bloomberg (the news, not the mayor) reports that the state of Illinois must pay 40 percent more than it did two months ago to borrow money in the bond markets (relative to supposedly risk-free Treasury bonds).
Illinois’ new 25-year, $300 million, taxable Build America bond issuance was priced to yield investors a whopping 7.1 percent yesterday.
Moody’s rates Illinois at A1 — showing once again that ratings are out of sync with markets.
To get a similar taxable yield on a corporate bond, you’d have to go into lower-rated territory. For example, you could buy a bond of similar maturity — actually one year longer — in Anadarko Petroleum (rated Baa3), one of BP’s Deepwater Horizon partners in the Gulf mess, for a taxable yield of nearly 7.3 percent.
If you don’t like Anadarko, you could buy bonds in second-tier brokerage house Jeffries (rated Baa2), also maturing in 2036, for 7.1 percent. And similar-maturity bonds in the Hartford Financial Services Group insurer (rated Baa3) will yield you 7.1 percent (if all goes well from now ’till then).
It is highly unlikely that the U.S. government would let Illinois fail. But markets could force the feds to prove it, just as they made Germany prove it about Greece.
New York State’s $1 billion capital project slush fund is dispensing borrowed money across the state outside public scrutiny, but two local governments have inadvertently given New Yorkers a glimpse of its inner workings. Read More
Who could be against “smart schools”?
The unsurprising answer: not nearly enough New Yorkers to defeat Proposal 3 on yesterday’s statewide ballot, which authorizes $2 billion in state borrowing to finance local school district purchases of computers and other classroom technology; expand schools’ high-speed and wireless Internet capacity; install “high-tech security features”; and build new classrooms for pre-kindergarten programs. Read More
Eric Schmidt, executive chairman of Google, has been named by Governor Cuomo to a commission “charged with advising the State on how to best invest the Governor’s proposed $2 billion Smart Schools Bond Act in order to enhance teaching and learning through technology,” as announced by the governor’s office today.*
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New York’s newly enacted state budget includes what looks like the biggest, juiciest capital pork pie Albany has cooked up since before the Great Recession. The State and Municipal Facilities Program first popped out of the budget oven last year in the form of a $385 million appropriation, of which $26.65 million was spent. Read More
The Cuomo administration reportedly is talking with labor leaders about tapping public and private pension funds to help pay for state infrastructure projects, including a multi-billion-dollar replacement for the Tappan Zee Bridge... Read More
The ink was barely dry on Governor Andrew Cuomo’s local government “restructuring” bill yesterday when the governor made two more concessions to unions on the issue of binding arbitration. Read More
The good news is that despite increasing pressure on both revenues and expenses, Standard and Poor’s has affirmed the Metropolitan Transportation Authority’s “A” rating, with a stable outlook.
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