Monday, February 11, 2013

Is Illinois a Bigger Default Risk than Iraq?

Public Sector Inc reports:
In a well-publicized move, Illinois decided earlier this week to forgo a $500 million bond offering after the interest rate it had to pay wary investors to buy the bonds rose too high. Illinois must already pay 1.4 percentage points more than states with a AAA rating to attract investors to its debt, thanks to a recent downgrade of the state's financial status by Standard & Poor's, which noted among other things the state's failure to fix its poorly funded pension system. How wary are investors of the state's debt? 
Well according to CMA Datavision, which regularly ranks the highest government default probabilities in the world based on the cost of insuring public debt, Illinois was ranked last month the 8th most likely default candidate worldwide, and the only American state on the list. Greece and Argentina top the list, but both Iraq and Portugal are rated less of a risk by those buying insurance against government debt defaults.


  1. and who was speaking at the press conference investigating Standard and Poors for fraud. Lisa Madigan, the Illinois Attorney General. Fancy that!

  2. So help me out Robert, what am I missing here? The state could not borrow any money due to rising interest rates. And the rates are still far below historical norms.

    If rates were to continue rising (say 5% for the 10 year) how would states fund their budgets? The federal government would simply turn to the FED to print. But the states?

    Isn't this more proof that QE will never end?


  3. I can't wait to see IL tax human and capital flight.