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2010-10-05 — bloomberg.com
What Illinois pays isn't the most interesting part of this article... it's the description of the Build America Bonds program: To make it cheaper for localities to borrow, the Treasury pays 35 percent of the interest cost of Build Americas, whose 30-year yields were about 1.4 percentage points higher than top- rated tax-exempt bonds yesterday, according to Wells Fargo & Co. and Municipal Market Advisors indexes. Build America interest payments are subject to federal taxes, unlike traditional municipals, whose tax-exempt yields aren’t a lure for investors abroad. Because it's not attractive compared to traditional, tax-exempt municipals, it's not a big sell for Americans and domestic interests. Yet it's subsidied to the tune of 35%, so that combined with the tax status makes it attractive to foreigners who desperately need new places to park their dollars. I also suspect there is an explicit (or at least implicit) default guarantee involved, or some role in ownership of the assets in the case of default (probably a transformation to equity, which would evolve into a foreign privatization/selloff off the assets). source article | permalink | discuss | subscribe by: | RSS | email Comments: Be the first to add a comment add a comment | go to forum thread Note: Comments may take a few minutes to show up on this page. If you go to the forum thread, however, you can see them immediately. |