From the WSJ on Wednesday afternoon, provisional details of Illinois’ delayed $3.7bn pension bond sale:
Initial indications on the deal Tuesday showed $6.1 billion in orders, with around a fifth of those coming from international investors, such as sovereign-wealth funds and insurance companies, one market participant said.
According to a term sheet, the state launched the longest maturity in the deal, due in 2019, at 2.40 percentage points above the 10-year Treasury, to yield roughly 5.84%.
Not terrible for an issuance to cover an existing pension payment shortfall from a state under investigation by the SEC for alleged inadequate disclosure of pension funding levels that are said by Moody’s to be the lowest in the United States. (Phew.)
But the origin of demand is of more interest here than its size. As the muni market continues its metamorphosis into a credit risk asset class, complete with shorting by hedge funds, it looks like SWFs are viewing the issuance as a much needed source of yield.
More details to come.
Related links:
Illinois plans $3.7bn bond sale – FT
Ill(inois) bevhaiour in the municipal market [updated] – FT Alphaville