CHICAGO (Reuters) – A continued surge in interest rates could sink a plan under consideration by Chicago Mayor Rahm Emanuel’s administration for a massive bond sale to boost pension funding, a city official said on Thursday.
Carole Brown, the city’s chief financial officer, said a securitization was still on the table while she keeps a watchful eye on rates.
Rates - Level - Financing - Sense - Reuters
“If rates continue to rise it is conceivable they will rise to the level where the financing didn’t make sense and we wouldn’t proceed,” she told Reuters.
The U.S. Federal Reserve has signaled that it will continue to raise rates after it lifted the key lending rate on Sept. 26.
Rates - US - Bond - Market - Week
Rates in the U.S. municipal bond market have jumped particularly over the last week. Since the pension bond idea first surfaced at an Aug. 2 investors conference hosted by Emanuel, 30-year bond yields on Municipal Market Data’s benchmark triple-A scale climbed to 3.41 percent from 3.05 percent.
Brown is mulling a highly rated securitization of a Chicago revenue stream that could produce as much as $10 billion for pensions, boosting their currently low funded ratio of 26 percent.
The city has already employed...
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