Can someone give me a quick tutoring in this. I read the article and basically understand it but I am looking for more insight. Thanks.
Yes, bond buyers are getting nice returns.
Can someone give me a quick tutoring in this. I read the article and basically understand it but I am looking for more insight. Thanks.
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With the bond insurers failing buyers are demanding a higher interest rate be paid as the income generated from the project (rather than the rating of the insuring agency) is now the primary concern when it comes to repayment..
What Denver is seeing is nothing ,, these are small increases compared to what Orlando got hit with for the three vanity projects of our mayor ,, an arts center , a new stadium for the Orlando Magic and refurbing (again) the underutilized Orange bowl stadium ,, estimated at $1B ,, we are already over by $150M just in interest expenses as buyers see this as a boondoggle (they’re right) with none of the three ever able to repay their initial cost ,, instead we are relying on tourist taxes to pay for them just as we enter a long drawn our recession to pay the bills..
Interest rates reflect:
* Demand for debt (the market has little appetite for debt, these days) low interest = no interest from the market
* The risk that the debt won’t be repaid.
* The waning credibility of the rating agencies and bond insurers as means of assessing and mitigating risk.
Municipal bond prices are falling. Might be some buying opportunities.