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Rate for Port Authority of New York and New Jersey Soar to 20%

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February 13, 2008 – Comments (8)

I have been waiting to see rates increase, but this I never expect.  According to a Bloomberg report the rates in an auction for these municipal bonds soared to 20% from 4.3% a week ago.

Wisconsin also faced increased rates:

"Some borrowers paid higher rates, even if their auctions didn't fail. Wisconsin's 28-day auction yesterday of taxable bonds was set at a 10 percent rate, up from 4.75 percent for identical securities Feb. 7.

Frank Hoadley, Wisconsin's director of capital finance, said he had no advance warning from bankers about the jump in rates. ``We are making decisions'' about converting the auction bonds to different kinds of debt, he said."

And, omg, student loans...

"Yesterday, $27.5 million of federally taxable student loan debt issued by Vermont's Student Assistance Corp. and insured by Ambac Financial Group Inc. reset at 18 percent, up from 5 percent as of Jan. 15. Ambac was the first bond insurer to lose its AAA credit rating"

So much for the fed lowering rates... 

The things that are unfolding here leave me utterly dumbfound, yet people are buying in this market... 

 

8 Comments – Post Your Own

#1) On February 13, 2008 at 9:09 PM, dwot (61.31) wrote:

I was just thinking, by the lack of recommends on my post a couple back where I was saying I was glad for the failed municipal borrowing I interpret as not agreeing.  But look at how the costs are showing up now... 

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#2) On February 13, 2008 at 10:05 PM, CycleFreak7 (< 20) wrote:

I got burned on the "sucker's rally" a few weeks ago.

Long term does not look good. Today's news about retail sales was a red herring.  the overall downtrend will resume with a vengence at the next bit of bad news.

Slightly bad news = big drop.

Really bad news = huge drop.

Today's "rally" was on low volume. Big players are staying out and the shorts are not covering. 

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#3) On February 13, 2008 at 10:31 PM, dwot (61.31) wrote:

In a bull market you buy on the dips, in a bear market you sell to the rallies...  Or so I've heard.

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#4) On February 13, 2008 at 10:35 PM, Imperial1964 (97.89) wrote:

Wow.  I wish I could buy muni-bonds making 20%  To hell with the stock market if I can get returns like that on muni-bonds!

You're right; there is a growing divergence between the bond market and the stock market.  And few are taking heed.

I wish I had the stomach to put some money into an ultrashort ETF right now. 

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#5) On February 13, 2008 at 11:44 PM, dwot (61.31) wrote:

Yes, I remember my grandpa buying 19.5% Canada Savings Bonds when rates went through the roof around 1980.

So, what's the difference between a socialist country and a capitalist country?

Socialist countries pay for things like children's health care.  Capitalist countries bail out bankers and investors. 

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#6) On February 14, 2008 at 12:35 AM, mickeyc21 (29.63) wrote:

dwot - I kept waiting all day for a retraction of that article.

It seems farfetched. Reality is outpacing the disaster theorists wildest fantasies at the moment.

I have to say Peter Schiff is looking positively clairvoyant right now. This was the only part of his hypothesis not to have happened. I am expecting major problems and have been for nearly a year now but I am stunned at the speed of events in  recent weeks. 

I feel genuinely sorry for those attempting to buy low right now. 

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#7) On February 14, 2008 at 4:20 AM, AnomaLee (28.68) wrote:

The financial markets of today remind me of how the start of the 1997 Asian Crisis had such a huge snowball effect that it eventually led to the Russian default and the leverage crisis of Long Term Capital Management....

We're probably still in a slow beginning stage somewhat similar to the first shoe to drop.... A snowball effect will happen.

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#8) On February 14, 2008 at 8:16 AM, dwot (61.31) wrote:

mickeyc21, I suspect that it went up so much because many investors were not looking to invest there, it got bid up so high because of small volume of investors.

You just look at everything that has been done and it spells nothing but trouble.  Those that warned early that changes were going to lead to big trouble were correct, yet they were mocked.

 

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