Illinois Pays More than Mexico as Cash-Strapped States Sell Bonds Overseas

[The Northerner]

Illinois capital-markets director John Sinsheimer and Citigroup Inc. bankers took a globe-girdling trip from the U.K. to China in June to persuade investors that the state’s $900 million of Build America Bonds were a bargain.

The seven-country visit worked. The state sold one-fifth of the federally subsidized securities abroad the next month, tapping investors who are the fastest-growing source of borrowed cash for U.S. municipalities. Illinois, with the lowest credit rating of any state from Moody’s Investors Service, dangled yields higher than Mexico, which defaulted on debt in 1982, and Portugal, which costs more to insure against missed payments.

“U.S. states are among the cheapest sovereign credits in the world,” said Patrick Brett, a Citigroup banker who marketed the Illinois securities overseas. “You’re actually picking up a good amount of spread for arguably better credits relative to equivalently rated corporates and sovereigns.”

International ownership of U.S. municipal bonds jumped 37 percent in the first half of the year from the end of 2009 to $83 billion, a Sept. 17 Federal Reserve report shows. Spurring the growth are Build America Bonds, created by President Barack Obama’s economic stimulus program to finance public-works projects. More than $140 billion of the debt has been sold in the 17-month-old market. About a quarter may have been bought overseas through June, said Matt Fabian, an analyst with Concord, Massachusetts-based Municipal Market Advisors Inc.

“The more types of investors you have, the better the overall market,” said Fabian, based in Westport, Connecticut.

Read more: http://www.bloomberg.com/news/2010-10-05/illinois-pays-more-than-mexico-as-cash-strapped-states-sell-bonds-overseas.html

[Hannah Bell]

1. i'd bet citi has another scam up its sleeve. why doesn't the state just sign off its government to

"investors".

because they're going to get it anyway.

this is sick shit.

[dixiegrrrrl]

2. And you notice the banks, which get fees for selling the bonds,

are the only ones who will make a clear risk-less profit.
If the economy gets worse and Illinois cannot pay on the bonds, the investors lose, the state loses, the tax payers ( government subsidized bonds) loses, banks win.