NJ Covid Bonds (4) Pricing 1.95%

According to the EMMA website New Jersey is planning to borrow up to $6 billion to keep the lights on. #muniland

It was reported yesterday that…

The New Jersey Department of the Treasury…priced the General Obligation bonds authorized under the COVID-19 Emergency Borrowing Act one day earlier than anticipated due to the amount of interest the State had received. Treasury confirmed that the bonds were all sold tax-exempt in the capital market and the transaction was significantly oversubscribed. The True Interest Cost (TIC), which is the total cost of the borrowing, is expected to be below 1.95 percent.

But as with most coverage of financial information on governments there was no context provided. What does True Interest Cost mean? Is 1.95 percent really good these days? What would a state not flirting with junk bond status have to pay?

In explaining why RAY is better, this report defines TIC:

Now that that’s cleared up, here’s what it has cost other states:

5 responses to this post.

  1. Posted by NJ2AZ on November 18, 2020 at 2:52 pm


    i suspect in my lifetime we’re going to look back at what currently constitutes ‘modern finance’ and realize what a joke it all is


    • Posted by boscoe on November 18, 2020 at 3:16 pm

      Wouldn’t one way to look at “modern finance” is you get 0% on a savings account, 0.6% on a 2-year CD, and +/- almost 2% coupon on a New Jersey guaranteed-to-pay G.O. bond?


  2. Posted by Tough Love on November 18, 2020 at 3:17 pm

    The difference between the All-in-TCI and the TCI would be interesting to know ….. AND ….. to compare with that difference in Private Sector Bond Offerings.

    That would tell us whether (as I suspect may be true) the “costs of issuance” are excessive in the PUBLIC Sector.


  3. Posted by geo8rge on November 18, 2020 at 8:53 pm

    What would the interest rate be if they sold the bonds to Fed Gov?


    • Posted by geo8rge on November 19, 2020 at 10:48 am

      The Municipal Liquidity Facility might charge a higher rate than the market. Murphy might have originally intended to use the MLF but the recent downgrades might have made that impossible.

      “Interest rates are based on an index—the overnight index swap rate—that tracks the effective federal funds rate (which currently hovers near 0 basis points) plus an “applicable spread” ranging from 100 (AAA) to 330 (BBB-) basis points depending on the issuer’s credit rating. For taxable securities (i.e., notes on which paid interest is subject to federal or state income taxes), the rate is equal to that amount divided by 0.70.”



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