Monday, October 20, 2008
Death to Muni
CA 9/1/2037 LOS ANGELES CALIF CMNTY DEV AG A3 BBB+ RADIAN 6.490 9.750 68.69 9/1/2017 100.00
WTF is that crap Dawg? That crap is a muni bond offering. California, maturity 2037, agency, ratings and insurance, and the "numbers." Supposedly 6.49% the price is $68.69 so the true yield is 9.75% tax free. [The last two numbers are call date and price.] In California 9.75% double tax free is like 15% equivalent in the highest brackets. This probably won't happen. There's got to be an option for the issuing agency to decline.
The repercussions are interesting. We lose the short term impetus of the municipal debt for infrastructure trade but we take that from general economic health long term. In this specific case I fully expect the Community Redevelopment District to take the usurious terms and do even less harm than if they had gotten more money. Talk about unexpected consequences. Comm Dev Dists are the anthesis of rational public expenditures. Planners with daddies' credit card.