Sweet Home Alabama Caught in Bond Auction Supply Tsunami
Bond Auction Supply Tsunami...
U.S. states and local governments may extend the worst slump in municipal bonds on record as they replace as much as $166 billion of auction-rate securities.
Twenty-one states face budget deficits in fiscal 2009, including 16 that are short at least a combined $30 billion.
The massive supply of bonds being auctioned off at the same time, in a short term asset market dearth of buyers,
is driving yields to all time highs and will cost local governments hundreds of billions, driving up taxes.
Sweet Junk Sewer Bond Home Alabama...
Jefferson County, Alabama, had $3.2 billion of bonds slashed to below investment grade (junk) by S&P.
The county said it may be unable to pay banks holding floating-rate debt for its sewer system or make payments on related interest-rate swaps.
Jefferson County, with $193 million in sewer reserves, faces the prospect of having to pay more than $1 billion to banks to buy back debt and unwind the swaps.
The county may be forced to terminate its $5.4 billion of swaps at a cost it estimated at $184 million because its bond rating has dropped so low.
Since the debt yield rose to 10%, the county said it paid $6 million more in interest on its sewer debt in the four months ended in January.
U.S. states and local governments may extend the worst slump in municipal bonds on record as they replace as much as $166 billion of auction-rate securities.
Twenty-one states face budget deficits in fiscal 2009, including 16 that are short at least a combined $30 billion.
The massive supply of bonds being auctioned off at the same time, in a short term asset market dearth of buyers,
is driving yields to all time highs and will cost local governments hundreds of billions, driving up taxes.
Sweet Junk Sewer Bond Home Alabama...
Jefferson County, Alabama, had $3.2 billion of bonds slashed to below investment grade (junk) by S&P.
The county said it may be unable to pay banks holding floating-rate debt for its sewer system or make payments on related interest-rate swaps.
Jefferson County, with $193 million in sewer reserves, faces the prospect of having to pay more than $1 billion to banks to buy back debt and unwind the swaps.
The county may be forced to terminate its $5.4 billion of swaps at a cost it estimated at $184 million because its bond rating has dropped so low.
Since the debt yield rose to 10%, the county said it paid $6 million more in interest on its sewer debt in the four months ended in January.
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