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Illinois credit rating gets downgraded.Lowest of any U.S. State ever.
June 02, 2017, 07:14 AM
wcb6092Illinois credit rating gets downgraded.Lowest of any U.S. State ever.
http://www.zerohedge.com/news/...ever-rating-us-stateThe monetary problems plaguing the state of Illinois (not to mention its public pensions) have been widely documented here over the past few years, and today the rating agencies finally noticed, when in the span of a few hours, first S&P, then Moody's downgraded Illinois to BB+/Baa3, respectively, both just one notch above junk, the lowest rating ever given to a U.S. state, as both agencies cited a long-running political stalemate over a budget shows no signs of ending.
In the first downgrade, S&P warned that Illinois is at risk of soon losing its investment-grade status, an unprecedented step for a state that would only deeper the government’s strain. Bypassing its traditional 90-day review, S&P said Illinois will likely be downgraded around July 1, when the new fiscal year begins, if leaders haven’t agreed on a budget that starts addressing the state’s chronic deficits.
In a statement, S&P analyst Gabriel Petek said that "The unrelenting political brinkmanship now poses a threat to the timely payment of the state’s core priority payments."
Petek's ire was prompted by Illinois' inability to pass a budget for the past two years amid a clash between the Democrat-run legislature and Republican Governor Bruce Rauner. The ongoing confrontation has left the fifth most-populous US state with a record $14.5 billion of unpaid bills, ravaged entities like universities and social service providers that rely on state aid and undermined Illinois’s standing in the bond market, where investors have demanded higher premiums for the risk of owning its debt, Bloomberg reported.
The S&P analyst added that "the rating actions largely reflect the severe deterioration of Illinois’ fiscal condition, a byproduct of its stalemated budget negotiations."
In a similar statement, Moody's said that "legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance, allowing a backlog of bills to approach $15 billion, or about 40% of the state's operating budget. During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached in an extended session."
The rating agency added that "the downgrade to Baa3 for Illinois' GO bonds is consistent with the state's intensifying pressure from pension liabilities; by our calculation, the state's unfunded pension liability for its five major plans in aggregate grew 25% in the year ended June 30, 2016, to $251 billion."
And like S&P, Moody's kept the state on negative outlook, citing the potential for additional credit weakening "because of a continuing political impasse that has left Illinois increasingly vulnerable to adverse revenue trends and severely underfunded retiree benefit plans."
The downgrades, which also pushed some debt backed by legislative appropriations into junk, came a day after Illinois’s legislature blew the deadline for approving a compromise budget by a simple majority. Now, it gets even more difficult as it will take a higher threshold, or three fifths majority vote in each legislative chamber, to pass anything which effectively guarantees that one month from today Illinois will be America's first ever Junk rated state.
On Wednesday, governor Rauner, who is up for re-election in 2018, and Democratic House Speaker Michael Madigan, who controls much of the legislative agenda, faulted each other for the unprecedented gridlock. The governor also held Democrats responsible for Thursday’s rating cut.
Cited by Bloomberg, a spokeswoman for Rauner said that “Madigan’s majority owns this downgrade because they didn’t even attempt to pass a balanced budget, get our pension liability under control, and other changes that would put Illinois on better financial footing. The governor will continue working toward a truly balanced budget with changes to our system to grow jobs and provide real and lasting property tax relief.”
_________________________
June 02, 2017, 07:24 AM
chellim1quote:
Madigan’s majority owns this downgrade because they didn’t even attempt to pass a balanced budget
Democratic House Speaker Michael Madigan has ruled the Illinois legislature with an iron fist for a loooong time....
Madigan is the 2nd longest-serving leader of any state legislative body in the history of the United States, having held the position for all but two years since 1983. He has been a member of the Illinois House since 1971, representing the 22nd District, a majority Hispanic area surrounding Midway Airport in Chicago's Southwest Side.
Governor Rauner has his work cut out for him... going up against the Chicago Democrat machine.
"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible."
-- Justice Janice Rogers Brown
"The United States government is the largest criminal enterprise on earth."
-rduckwor June 02, 2017, 07:34 AM
maxwayneKing Madigan will not let anyone challenge his power. The governor is doing all he can to keep Madigan from totaly destroying the state.
June 02, 2017, 07:45 AM
chellim1quote:
King Madigan will not let anyone challenge his power.
Not anyone.
BUT the math of his massive deficits is slowly catching up with him. As Chicago teeters on the edge of bankruptcy, King Madigan will eventually be brought down.
"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible."
-- Justice Janice Rogers Brown
"The United States government is the largest criminal enterprise on earth."
-rduckwor June 02, 2017, 07:59 AM
mrvmaxI was born in the great state of Texas but grew up in Illinois, I left illinois at 17 after graduating high school and have never been back and have no plans of doing so. I lived in a rural area in Illinois and despite politics it was a great place to grow up - hunting, fishing and many outdoor adventures within walking distance of the house. It's too bad that politics have ruined the state.
June 02, 2017, 08:04 AM
2012BOSS302quote:
downgraded Illinois to Baa3
Is that said Baa, Baa, Baa as the sheep are led to destruction
Donald Trump is not a politician, he is a leader, politicians are a dime a dozen, leaders are priceless. June 02, 2017, 08:11 AM
JALLENIt is surprising that anyone puts the slightest reliance on S&P, or any of the other rating outfits after their role in the residential mortgage rating scsm a decade ago.
Luckily, I have enough willpower to control the driving ambition that rages within me.
When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson
"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown June 02, 2017, 08:16 AM
chellim1quote:
Originally posted by JALLEN:
It is surprising that anyone puts the slightest reliance on S&P, or any of the other rating outfits after their role in the residential mortgage rating scam a decade ago.
They are always late to the party, aren't they?
By the time they tell you there's a problem... it's gotta be a big one.
"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible."
-- Justice Janice Rogers Brown
"The United States government is the largest criminal enterprise on earth."
-rduckwor June 02, 2017, 08:16 AM
Elk Hunterquote:
The monetary problems plaguing the state of Illinois (not to mention its public pensions) have been widely documented here over the past few years, and today the rating agencies finally noticed, when in the span of a few hours, first S&P, then Moody's downgraded Illinois to BB+/Baa3, respectively, both just one notch above junk, the lowest rating ever given to a U.S. state, as both agencies cited a long-running political stalemate over a budget shows no signs of ending.
So how does this compare with kalifornistan's TWO TRILLION DOLLARS OF DEBT? And note that it keeps growing!
Elk
There has never been an occasion where a people gave up their weapons in the interest of peace that didn't end in their massacre. (Louis L'Amour)
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-Thomas Jefferson
"America is great because she is good. If America ceases to be good, America will cease to be great." Alexis de Tocqueville
FBHO!!!
The Idaho Elk Hunter
June 02, 2017, 08:24 AM
chellim1Why would anyone buy this stuff?
Here's a sample of an actual trade, yesterday:
2017-06-01 5:01pm 2034 April 5.250% coupon 102.125 2.607 $350,000 Investor bought
Trading above par, at a yield of 2.607
As an illustration of our current financial environment, one-step above junk is only 250 bps premium of AAA.
It seems that corporates would have a better yield and less risk.
But Rahm has money for illegals to find sanctuary....
"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible."
-- Justice Janice Rogers Brown
"The United States government is the largest criminal enterprise on earth."
-rduckwor June 02, 2017, 08:38 AM
JALLENquote:
Originally posted by chellim1:
Why would anyone buy this stuff?
Here's a sample of an actual trade, yesterday:
2017-06-01 5:01pm 2034 April 5.250% coupon 102.125 2.607 $350,000 Investor bought
Trading above par, at a yield of 2.607
As an illustration of our current financial environment, one-step above junk is only 250 bps premium of AAA.
It seems that corporates would have a better yield and less risk.
But Rahm has money for illegals to find sanctuary....
Are you sure?
A bond with a coupon of 5.25 due in ~17 years to yield 2.6% ought to have a much larger premium than that... neglecting quality concerns.
Luckily, I have enough willpower to control the driving ambition that rages within me.
When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson
"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown June 02, 2017, 08:42 AM
chellim1Right... doesn't seem like much of a premium to bring the yield that low....
www.municipalbonds.com/bonds/issue/4521517F4/
"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible."
-- Justice Janice Rogers Brown
"The United States government is the largest criminal enterprise on earth."
-rduckwor June 02, 2017, 08:46 AM
Balzé Halzéquote:
Originally posted by Elk Hunter:
quote:
The monetary problems plaguing the state of Illinois (not to mention its public pensions) have been widely documented here over the past few years, and today the rating agencies finally noticed, when in the span of a few hours, first S&P, then Moody's downgraded Illinois to BB+/Baa3, respectively, both just one notch above junk, the lowest rating ever given to a U.S. state, as both agencies cited a long-running political stalemate over a budget shows no signs of ending.
So how does this compare with kalifornistan's TWO TRILLION DOLLARS OF DEBT? And note that it keeps growing!
Two trillion!?!? My God.
~Alan
Acta Non Verba
NRA Life Member (Patron)
God, Family, Guns, Country
Men will fight and die to protect women... because women protect everything else. ~Andrew Klavan
June 02, 2017, 11:11 AM
Bulldog7972quote:
Originally posted by mrvmax:
I was born in the great state of Texas but grew up in Illinois, I left illinois at 17 after graduating high school and have never been back and have no plans of doing so. I lived in a rural area in Illinois and despite politics it was a great place to grow up - hunting, fishing and many outdoor adventures within walking distance of the house. It's too bad that politics have ruined the state.
Illinois south of I80 is great. Nothing like Chicago. Those folks should secede from Illinois
June 02, 2017, 01:09 PM
Fenrisquote:
Originally posted by Balzé Halzé:
quote:
Originally posted by Elk Hunter:
So how does this compare with kalifornistan's TWO TRILLION DOLLARS OF DEBT? And note that it keeps growing!
Two trillion!?!? My God.
Plus Commiefornia is pursuing a statewide single payer health care system. The estimated cost is $400 billion annually. That is, without doubt, vastly under-estimated.
CA & IL are in a race to the bottom. Even money bet on which achieves bankruptcy first.
God Bless and Protect our Beloved President, Donald John Trump. June 02, 2017, 01:26 PM
JALLENquote:
Originally posted by chellim1:
Right... doesn't seem like much of a premium to bring the yield that low....
www.municipalbonds.com/bonds/issue/4521517F4/
My calculator for a 16.9 year to maturity, 5.25% coupon bond selling for 102.125 the YTM is 5.058%.
Maybe there are some funky call provisions, or limitations, etc.
Luckily, I have enough willpower to control the driving ambition that rages within me.
When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson
"Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown June 02, 2017, 05:23 PM
PDquote:
Originally posted by chellim1:
Why would anyone buy this stuff?
If it's insured, why not. And if you're an Illinois resident you probably don't have a choice if you want state tax free interest. No one was afraid of insured PR bonds except for the insurers.
Until the Detroit debacle on one really got burned on munis.
June 02, 2017, 07:11 PM
SigmundI'm so thankful I chose to live in Iowa. I transferred to the IA/IL Quad Cities 25 years ago and was advised bu a co-worker to live on the IA side. I'd thank the guy except he died a few years ago.
June 02, 2017, 08:46 PM
C-Dubsquote:
Originally posted by Bulldog7972:
quote:
Originally posted by mrvmax:
I was born in the great state of Texas but grew up in Illinois, I left illinois at 17 after graduating high school and have never been back and have no plans of doing so. I lived in a rural area in Illinois and despite politics it was a great place to grow up - hunting, fishing and many outdoor adventures within walking distance of the house. It's too bad that politics have ruined the state.
Illinois south of I80 is great. Nothing like Chicago. Those folks should secede from Illinois
I'd say South of I-80 and West of I-39. Basically Rockford in the SW corner and everything North and East
“I won't be wronged. I won't be insulted. I won't be laid a-hand on. I don't do these things to other people, and I require the same from them.”