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 ...
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.
This is like me celebrating having been ‘awarded’ a credit card with an interest rate of 29.99%!
Do govt officials ever think - If this was my money, would I do it?
Greece with snow and Detroit.
Financing debt with more debt at a higher intrest rate, how is this good?
Someday the music in IL will stop and there won’t be enough chairs.
I think the band must be getting pretty tired by now. Jerry Brown looks responsible compared to Illinois.
“...a yield of 5.877%”
Fed Funds Rate .25%
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.
Yes sweet deal but not so much for the taxpayers.
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.
Great for some big Dem donors I expect- and, after all, that’s what counts isn’t it?
Not tax exempt, but risky yes.
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.
How is this great for the donors, dear Mrs. Smith?
You tell me Mrs. TopQuark sweetie.
Could you please explain how "a lot a seniors are going to get sucked into this yield?"
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"
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.
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