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Illinois Bond Sale Gets Done at a Cost
WSJ ^ | 2/24/2011 | MICHAEL CORKERY And JEANNETTE NEUMANN

Posted on 02/24/2011 3:56:35 PM PST by FromLori

llinois enticed hedge funds, mutual funds and non-U.S. buyers to purchase $3.7 billion in new pension bonds, but the cash-strapped state had to pay dearly to get the deal done.

Illinois officials were forced to promise a yield that is about two percentage points higher than was paid by companies with similar credit ratings in recent bond offerings. The state's bond rating is one of the lowest among the 50 states.

The bond sale is likely to soothe some fears about whether Illinois and other especially troubled governments will be able to tap the capital markets while their budgets are strained by sluggish tax revenue and daunting expenses for health care and pensions. But the fact that Illinois had to borrow from investors to make a required contribution to its pension funds shows the depth of its fiscal problems.

Illinois tapped the taxable-debt market, where yields tend to be higher than in the tax-exempt municipal-bond market, because selling bonds to prop up sagging pensions typically doesn't qualify for tax-exempt status under the U.S. tax code, say bankers and state officials.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; News/Current Events; US: Illinois
KEYWORDS: bonds; economy; ill

1 posted on 02/24/2011 3:56:36 PM PST by FromLori
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To: FromLori

Springfield is going to have to drum up the money somehow down the road, or issue yet another set of bonds in a Ponzi scheme.


2 posted on 02/24/2011 3:58:30 PM PST by HiTech RedNeck (Hawk)
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To: FromLori

This is like me celebrating having been ‘awarded’ a credit card with an interest rate of 29.99%!


3 posted on 02/24/2011 3:58:40 PM PST by Trust but Verify (Let's party like it's 1773!)
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To: HiTech RedNeck

Do govt officials ever think - If this was my money, would I do it?


4 posted on 02/24/2011 3:59:41 PM PST by Jolla
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To: FromLori

Greece with snow and Detroit.


5 posted on 02/24/2011 4:02:12 PM PST by Leisler (Our debts are someone's profit. Follow the money, the vig.....)
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To: FromLori

Financing debt with more debt at a higher intrest rate, how is this good?


6 posted on 02/24/2011 4:02:19 PM PST by The Magical Mischief Tour (With The Resistance...)
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To: FromLori

Someday the music in IL will stop and there won’t be enough chairs.


7 posted on 02/24/2011 4:03:05 PM PST by JPG (As WI goes, so goes the nation. Thank you, Gov Walker.)
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To: JPG

I think the band must be getting pretty tired by now. Jerry Brown looks responsible compared to Illinois.


8 posted on 02/24/2011 4:07:10 PM PST by Frantzie (HD TV - Total Brain-washing now in High Def. 3-D Coming soon)
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To: FromLori

“...a yield of 5.877%”

Fed Funds Rate .25%


9 posted on 02/24/2011 4:08:46 PM PST by mrsmith
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To: HiTech RedNeck

I’m guessing this has about the same investment potential as lottery tickets?

It would be fun to watch Cali, Ill, and NY sink in the sea of red ink if I didn’t know we’ll eventually wind up paying to bail them out.


10 posted on 02/24/2011 4:09:29 PM PST by nascarnation
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To: mrsmith

Yes sweet deal but not so much for the taxpayers.


11 posted on 02/24/2011 4:13:28 PM PST by FromLori (FromLori">)
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To: mrsmith; All
“...a yield of 5.877%”

And that is Federal and State Tax Exempt for IL residents. I think a lot a seniors are going to get sucked into this yield and I do not know the future but they may also get their financial heads handed to them too.

Side note, Rush Limbaugh....

Rush was on Hannity a few years ago and noted a good chuck of his money was in FLA real-estate ( He owned a ton of raw land, rumors of him building on it as I knew a Civil Engr that went down and it got cancelled with the decline in 2006).

Also something like 50% of his Portfolio was in Muni's. I hope the heck they are in tax free Republican States or he has gotten out of most of them.

12 posted on 02/24/2011 4:22:41 PM PST by taildragger (( Palin / Mulally 2012 ))
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To: FromLori

Great for some big Dem donors I expect- and, after all, that’s what counts isn’t it?


13 posted on 02/24/2011 4:26:45 PM PST by mrsmith
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To: taildragger

Not tax exempt, but risky yes.


14 posted on 02/24/2011 4:31:01 PM PST by mrsmith
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To: All
fromLauri just has to pile it on the banks:

Yes sweet deal but not so much for the taxpayers.

How is this particularly sweet for the banks? And, at this point, what else could taxpayers do? Taxpayers got themselves into this mess, now they have to eat it.

Poor fromLauri: she seems to misunderstand finance but surely compensates with her hatred of the financial sector.

15 posted on 02/24/2011 4:49:07 PM PST by TopQuark
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To: mrsmith
Great for some big Dem donors I expect- and, after all, that’s what counts isn’t it?

How is this great for the donors, dear Mrs. Smith?

16 posted on 02/24/2011 4:51:27 PM PST by TopQuark
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To: TopQuark

You tell me Mrs. TopQuark sweetie.


17 posted on 02/24/2011 4:54:19 PM PST by mrsmith
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To: taildragger
llinois enticed hedge funds, mutual funds and non-U.S. buyers to purchase $3.7 billion

Could you please explain how "a lot a seniors are going to get sucked into this yield?"

18 posted on 02/24/2011 4:55:28 PM PST by TopQuark
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To: mrsmith
You tell me Mrs. TopQuark sweetie.

I can't tell you: your statement makes no sense to me: the bonds are purchased by foreigner, hedge funds and mutial mutual funds. No, I cannot fathom what it has to do with the "donors"

19 posted on 02/24/2011 4:57:46 PM PST by TopQuark
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To: mrsmith
Sorry I referred to you as Mrs.

The confusion would be easily prevented were you to write your name as MrSmith.

English is good, you know. Use it, English is your friend.

20 posted on 02/24/2011 5:01:11 PM PST by TopQuark
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To: Leisler
"Greece with snow and Detroit."

Um...this article is about ILLINOIS.

21 posted on 02/24/2011 5:04:27 PM PST by SnuffaBolshevik
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To: SnuffaBolshevik

Brain lock. ( Slaps side of head. Feels better )


22 posted on 02/24/2011 5:50:55 PM PST by Leisler (Our debts are someone's profit. Follow the money, the vig.....)
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To: TopQuark

Thanks, I stand corrected. Now is seniors buy bond funds with this stuff in it, that is a different story.


23 posted on 02/24/2011 6:28:34 PM PST by taildragger (( Palin / Mulally 2012 ))
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To: TopQuark

That’s hilarious. Thanks.


24 posted on 02/25/2011 3:19:07 PM PST by mrsmith
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