Monday, September 07, 2009

The G20 and the SEA, more connected that you know

Since I put up a Labor Day factoid on Friday here is something else.   For the few folks reading here today this is something only Fester may really care about:

I have suggested several times it was worth watching the Sports and Exhibition Authority's bonds that are paying for the new arena in town. They were variable rate bonds which have caused all sorts of people trouble of late (remember the PWSA problems? or even UPMC's auction rate bond last year, though it's not the same exact situation).  The SEA bonds even had this problem I suggested that they were nominally insured by FSA, a bond insurance company, which has had its share of problems in recent years.  I was just wondering how the variable rate part of the equation was working out.

Without having enough information (or time) to evaluate how well the swap set up by the SEA worked this is just one part of the equation.I presume the swap must have been helpful... otherwise there was a big story missed in how the bonds variable rates spiked last year.  Here is what I quickly compiled for what the yield has been on SEA bonds as traded since they were issued and started trading just about 2 years ago now. 
The story there I presume is mostly reflecting the turmoil in the financial markets last fall.  It all could have been a disaster for everyone if the situation had not been brief and rates had not come back down quickly. For the SEA's bond, it's hard to imagine a swap could have obviated all of that volatility... but the bigger news now is just how far the yield has dropped since then. There are lot of implications to that. Again, I would have to dig into the swap to see just how much that is actually impacting the SEA's budget if at all, but many loans are seeing lower and lower interest rates.  Is the SEA realizing a savings from that?  Could be quite a lot compared to what was budgeted. Depends on a number of things I don't have enough data to fully evaluate. 

The same dynamic however is going on in the mortgage ARM world. Most decent (i..e. non-predatory) adjustable rate mortgages are indexed off the 1 yeart T-bill rate which has been hovering around or under a remarkably low half a percent give or take.
So there was a scary moment in the past, but some really low rates now.  Some questions that arise from all of that such as why the PWSA bonds were so problematic yet no news along the way of any issues for the SEA bonds.  Questions for that public finance class homework.  Now with the SEA literally hosting the G20 at the convention center.  Who knew the SEA's fate rested so much on what the G-20 folks will be deliberating while here.
I know I know.. should look the same up for how the PWSA bonds have been trading.  They are broken up into a lot of different blocks and I don't have time to sort it all out.  Looks like JP Morgan is still remarketing the bonds as of September though at rates that have also come down to near the1 year t-bill rate as well. 


Blogger Dennis Patrick Leyden said...

I don't know that you read Italian, but there's a generally complementary but frank article in the Milan newspaper Corriere della Sera (roughly equivalent to Italy's New York Times) along with some nice photos.

Thursday, September 10, 2009 10:08:00 PM  

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