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.