Posted on 10/03/2002 5:33:02 AM PDT by snopercod
Edited on 07/19/2004 2:10:42 PM PDT by Jim Robinson. [history]
Sacramento, California, Oct. 2 (Bloomberg) -- California's record $11.9 billion power bond sale that begins later this month may lure some investors away from the state's general obligation debt, which carries higher credit ratings.
General obligation bonds, paid back with tax revenue, are fetching prices that don't cover the risk that chronic budget deficits will prompt rating cuts, some analysts say. The power bonds, rated three steps lower and sold by the state's water department, may pay as much as 1 percentage point more.
(Excerpt) Read more at quote.bloomberg.com ...
That is one heck of a lot of debt for one state to suck out of the US economy. No wonder, the power bonds come in 2 to 20 year maturities, insured & not insured, taxable and tax exempt, variable and fixed rate interest......
We are talking about California trying to get over $20 billion out of investors in the net few months in Notes and bonds! That doesn't count county, city and special district borrowing. That seems like a bit much since the state's economy is hurting and those within the state would do best with the tax exempt bonds.
``There's definitely going to be a premium'' in terms of higher yields to find enough buyers for the sale, said Thomas DeMarco, a fixed-income strategist at Vestigo Associates, the research arm of Fidelity Capital Markets. The BBB+ rating by S&P also ``may push some buyers out of the market'' because they're limited to investments with higher ratings.
When I saw the rating write-up that S&P gave these and listened to the conference call, they don't look like they are going to back down. My feeling is that S&P has helped derail the attempt by Davis et al to sweep the power bond issue out of sight.
California 30-year bonds yield about a 10th of a percentage point more than AAA munis, compared with 3/10 of a percentage point in mid-August, according to Bloomberg data. That means California's bonds have been rising in value relative to borrowers elsewhere in the U.S.
What is interesting is that the GO bonds of the State have been harmed by the budget problems, but don't seemed to be impacted by the underlying economy questions and health of infrastructure and political will, like the power bonds have. I guess, that if one is looking at a power bond, one is forced to look at the economic health of PG&E, SCE, the management skill of them and the ISO and then at the political will to make sure the system works economically. If one is looking at State GO bonds, one just looks at if the legislature will pretend to balance the budget.
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This says it all ... Gray Davis is not dealing with reality.
Dump Davis!!!!!
How much will California tax revenues fall due to the dock strike? They're saying $2 billion per day economic impact, so 10% of that works out to $200,000 per day.
What do you wanna' bet that $12.5 billion RAN gets bumped to $15 billion.
Up here in Washington we have an initialtive on the Ballot that is suppose to solve some of our highway transportation issues. Unfortunately, it asks voters for a levy of new taxes for ten year period. The bond issue would go to fund certain kinds of expenditures. Unfortunately if the new taxes and Bonds pass, the Dept. of Transportation has stated that it does not have sufficient budget to administer the programs in the bond issue and it has also pointed out that the projects will not be completed within 10 years so that additional money (a.k.a. taxes) will either have to be identified by the legislature or approved by voters to allow the will of the people to be implemented by this initiative if passed.
California has benefited more than some other states because its higher tax rates make tax-exempt investments more appealing.
Competing for investors with the power bond sale will be an offering of as much as $12 billion in notes next week to make up for lower tax collections, plus $1 billion of general obligation bonds. With tax-exempt yields at 34-year lows, some investors will see the power bonds as a better buy, money managers said.
How lucky the wealthy in California are to be benefited by high tax rates and notes and power bonds competing with GO bonds. Lucky, Lucky, Lucky folks! (/sarcasm)
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