CHICAGO, April 10 Illinois sold $250 million of
bonds on Thursday at a lower overall interest rate than the
state received for a debt sale in February, state officials
Bank of America Merrill Lynch won the general obligation
bonds carrying maturities from 2015 through 2039 in competitive
bidding at a true interest cost of 4.08 percent. A sale of $1
billion of GO bonds in February resulted in an overall interest
rate of 4.46 percent.
Thursday's sale narrowed Illinois' so-called credit spread
over Municipal Market Data's benchmark scale of triple-A-rated
bond yields. The spread for bonds due in 10 years fell to 100
basis points over the scale from 114 basis points on Wednesday,
according to MMD, a unit of Thomson Reuters.
MMD analyst Randy Smolik attributed the narrowing to
aggressive bidding on competitive deals and Thursday's strong
municipal market, where yields on the scale fell by as much as 6
At the beginning of the year, the spread for Illinois
10-year bonds was 145 basis points over the scale.
State officials said market concerns have eased after
Governor Pat Quinn proposed a fiscal 2015 budget last month that
calls for maintaining income tax rates at higher but temporary
levels set in 2011.
"The market has spoken today and clearly investors feel, as
the ratings agency has said in recent days, that Governor
Quinn's budget 'provides a basis for the state to achieve fiscal
balance,'" Acting Budget Director Jerry Stermer said in a
Ahead of the sale, all three credit rating agencies
affirmed Illinois GO bond ratings, which are the lowest among
Standard & Poor's Ratings Services, which rates Illinois at
A-minus with a developing outlook, said on Wednesday "the next
50 days or so will be pivotal to the state's future structural
"Although the state has implemented improvements in budget
and financial management practices, they have not been robust
enough to offset the sluggish economy and the accumulated
structural budget deficit," the rating agency said in a report.
While the state enacted comprehensive pension reforms in
December to ease a $100 billion funding shortfall, labor unions
and others are challenging the law in state courts contending
that the Illinois Constitution prohibits impairment of
retirement benefits for public sector workers.
(Reporting by Karen Pierog Additional reporting by Lisa Lambert