US States Reduce Borrowing Costs, Not Taxes
Short Sellers Are Cutting Borrowing Costs of States
Investors have to pay 284 basis points to insure their California bonds, 20 basis points more than for Portugal's. At 298 basis points, Illinois is in worse shape than Ireland. It costs more to insure the debt of New York (224 basis points) than Italy's.
Credit-default-swap spreads show that these U.S. states are "on the brink of financial catastrophe," according to Justin Marlowe, an assistant professor at the Daniel J. Evans School of Public Affairs at the University of Washington in Seattle.
The headline-worthy spreads haven't harmed these issuers in the bond market. They have reduced their cost of borrowing.
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posted by Victor Lloyd Smith @ 1:39 PM
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