Investors skimmed over Illinois' well-known financial troubles to vie for a piece of a $3.7 billion taxable pension bond sale on Wednesday.
The state received $6.1 billion in orders from a record 128 investors, according to John Sinsheimer, the state's capital markets director.
"Well, I have $6.1 billion of bids to tell me the market was comfortable with the budget. And 128 investors must have reached that conclusion as well," he said.
Illinois delayed the sale that has been slated for last week to give potential investors time to digest the $52.7 billion fiscal 2012 budget Governor Pat Quinn unveiled on Feb. 16.
The state's big structural deficit and huge unfunded pension liability, its inability to pay bills owed to vendors and public entities such as schools and hospitals on time, its cascading bond ratings, and its propensity to borrow its way out of financial problems have made Illinois a top concern in the $2.8 trillion U.S. municipal bond market.
The delay helped the general obligation bonds as prices have climbed in both the municipal bond market and in U.S. Treasurys. Spreads over Treasurys for the deal equaled about 280 basis points, while underwriters set the coupon and yield for the longest bonds, due in 2019, at 5.877 percent.
Sinsheimer said spreads narrowed from a 300-basis-point level a week ago. They also narrowed from so-called "whisper" levels that floated around the market on Tuesday.
Bonds due in 2014 were priced at a 280 basis point spread over comparable Treasurys, versus 285 basis points from Tuesday. The spread on the longest bonds, due in 2019, also narrowed 5 basis points to 240 basis points over Treasurys.
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