Illinois may well be
destined
to be our very own Greece, but it hasn’t caught the Greek disease just yet.
The state was able to sell $900 million in taxable bonds Wednesday at lower-than-expected yields, thanks in part to demand from the very foreign investors who might in more placid times have been tempted to buy Greek bonds.
The Illinois bonds, issued under the Build America Bonds program under which the feds pick up part of the interest tab, were priced at 3.25 percentage points above comparable Treasury yields. That compares with an expected 3.4 points above Treasurys.
Overseas buyers placed orders for a quarter of the issue, a banker tells Dow Jones. “If someone is a non-U.S. Investor, and they are thinking Greece versus the state of Illinois, they might want Illinois,” another investor tells the news service.
None of this is to downplay the problems in Springfield. The state’s got billions of dollars of unpaid bills and its severely underfunded pension plan is stuffed to the gills with bad derivatives bets. Traders have been betting Illinois is roughly as likely to default within the next five years as Iraq and Iceland.
But so far, there’s no sign of the sort of interest rate spike that sent Greece running from the market for the safety of a European Union bailout plan.
With the economy slowing and investors eager to add income-generating bonds to their portfolios, it appears that even troubled big states such as Illinois, New York and California will be able to buy some time by selling more debt in the coming year. Whether that enables them to come to grips with their problems is another question, of course.