The pricing for the 2050 maturity is 250 basis points above 30-year Treasuries, according to data compiled by Bloomberg. The so-called spread on a 40-year Build America in the university’s sale in December was 225 basis points.
The university hastened its return to the taxable market in order to lock in the current 35 percent federal subsidy, Kim said in an interview yesterday.
‘Huge Consideration’
“That was definitely a huge consideration,” she said. “It’s unclear what the duration of the program will be, but we know it’s not going to be 35 percent.”
The italics are mine. The uncertainty of the Build America bond subsidy causes borrowing before its needed, a term structure mismatch. Much of that money is mal-invested because it gives false signals about the real rate of growth needed for 30 year investments.
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