The state sold 30-year taxable bonds at an annualized yield of 7.48%, or 2.7 percentage points above the 4.78% yield on 30-year U.S. Treaury bonds earlier Thursday.
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On the 30-year bond that paid 7.48%, the Treasury subsidy means the net interest cost to the state is 4.86%. That is well below the 5.65% yield the state paid on conventional tax-exempt 30-year bonds it sold March 11.
These are Buy America bonds and get a Federal subsidy on interest rate. The Federales cover 2.6% in the interest cost. But overall the bet is that both governments will gain 7% efficiency to cover. State and Federal will do no better than 3% gains, and inflation at 2.5%, I still see an increasing shortfall. If State and Federal get hung up in the sorting out of Obamacare, then efficiency drops and relative debt burden becomes volatile.
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