Posted on 12/02/2010 12:45:39 PM PST by SeekAndFind
(Excerpt) Read more at bespokeinvest.com ...
I am surprised to see Virginia on this list.
My word, we had a SURPLUS in the last fiscal year, and historically, Virginia has some of the best muni bonds in the nation.
What does BPS mean?
I’m surprised Mexico and Venezuela are not on that list...
I think CDS is credit default swaps and BPS is the basis point cost??? Not sure. 100 basis points = 1%. Illinois is a nightmare. Worse than CA.
CDS is insurance to protect against default. Speculators drive the cost up on countries and companies they are shorting to drive them into bankruptcy.
BPS = Basis Points
One one-hundredth of a percent, used in measuring yield differences among bonds.
A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security
Illinois is worse than Mexico. I read something where they said Illinois is one o fthe worst in the WORLD - yes world.
RE: I’m surprised Mexico and Venezuela are not on that list...
This list is just for STATES in the USA.
But really, we should put California in the Mexico ledger :)
Basis PointS. Different way of expressing percent. 1% = 100 basis points.
Thanks!
Virginia is near the bottom of the list, which is good.
From the article:
“To insure $10,000 worth of Illinois debt for 5 years, a buyer would have to pay $291.30 per year. The cost for California is only slightly lower at $287.20. Michigan ranks third, followed by New Jersey, New York, Nevada, and then Florida. Of the 16 states that we found CDS prices for, Texas, Virginia, Maryland, and Delaware have the lowest risk of default.”
You believe Mexico and Venezuela are states in the US?
"Here Are The 12 American States Where Investors Are Most Terrified Of Default"
So this is about private debt in danger of default, right? I see Texas is on the list, even though the state government is constrained by a balanced budget requirement.
BPS = basis points. Poorer credit risks have to pay more for loans. It’s a good assumption that the sources being asked to provide funding are performing their own due dilly far better than you or I can and are asking for higher interest as way of protecting themselves against a higher perceived default risk. Only stands to reason. And the way the market measures this is by noting the excess interest those lenders are demanding, as measured by and in basis points.
Thanks for the clarification!
I see Texas is on the list, even though the state government is constrained by a balanced budget requirement.
Does that apply to capital projects? For example, if Texas builds a new highway can it sell bonds to pay for it outside of the balanced budget? Or does the entire cost have to be paid for in the current fiscal year?
RE: So this is about private debt in danger of default, right?
Not private debt, but STATE Debt.
Here is the BeSpoke explanation of their chart :
“On Monday we highlighted the recent spikes in default risk for some of the problematic European countries. So what has default risk for states done recently? We were able to track down 5-year CDS prices for 16 states, and we highlight their current prices in the table below.
While California probably comes to mind as the state that’s in the most trouble, Illinois actually has the highest default risk according to investors. To insure $10,000 worth of Illinois debt for 5 years, a buyer would have to pay $291.30 per year. The cost for California is only slightly lower at $287.20. Michigan ranks third, followed by New Jersey, New York, Nevada, and then Florida. Of the 16 states that we found CDS prices for, Texas, Virginia, Maryland, and Delaware have the lowest risk of default.”
SEE HERE :
http://www.bespokeinvest.com/thinkbig/2010/12/2/state-default-risk-levels.html
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