Sunday, September 25, 2011

More Public Finance Wonkery

Also from the story last week on the city's budget.  The city is open to floating a bond this year it says.  No surprise there. Read the Bond Buyer also from last week on the current "eye popping declines in muni yields".

For those who can get them at least.  Remember the curious bond that wasn't?  At this point, anyone who can float a bond will probably think about refinancing all that they can.  Which is one reason I found this headline on a recent SEA refinancing to clearly miss some basic facts of life in the world of finance: "SEA lowers its costs through perfectly timed bond maneuver". There is no 'perfect timing' in these things.. or at least you wouldn't know it was perfect timing until long after the deal.  If they had waited they probably would have done even better. But you can't expect anyone to pick the future in a financial markets like that. You certainly don't want public officials trying to outpick the market.   You make the best decisions you can and structure deals best you can. Knowing the future can always have a downside is one reason you generally don't lock yourself into noncallable bonds*.  So, barring those those who can't do so for one reason or another, at this point most any large bond out there that has not been refinanced in the last year or two probably is going to be looked at as a candidate for refinancing. 

* And since everything really does come back to the city's pension funding.  Remember again the city's pension bonds of the 1990s.  One big criticism of them was that they were issued noncallable for many years and thus could not take advantage of lower interest rates for a long time, if at all.  Any other noncallable, or effectively noncallable, bonds out there in the local muni-sphere?

3 Comments:

Anonymous Anonymous said...

Hi Chris - I was just reading this article about Nine American Cities Going Broke

http://247wallst.com/2011/09/27/nine-american-cities-going-broke/

It lists their credit ratings, which are all below Ba2. Just off hand, do you know what Pittsburgh's credit rating is?

Thursday, September 29, 2011 10:22:00 AM  
Anonymous Anonymous said...

That's Moody's rating, BTW.

Thursday, September 29, 2011 10:22:00 AM  
Blogger C. Briem said...

Ha... and the ratings agencies have been doing such a bang up job at prediction the last few years. That list is sort of like someone making a prediction next week of who gets to the first round of the MLB playoffs this year.

For the city of Pittsburgh I am reminded of the bond rating based on bad division: http://nullspace2.blogspot.com/2009/01/new-math-pittsburgh-bond-ratings-and.html

Thursday, September 29, 2011 12:00:00 PM  

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