State Treasurer Denise L. Nappier said the state saw higher interest rates on a recent bond refunding, just a week after two major rating agencies lowered credit ratings on the debt.
Still, Nappier called the $501.4 million General Obligation refunding bond sale a success, since it will save the state $75.5 million in debt service costs over the life of the refinanced bonds.
Nappier acknowledged recent credit ratings actions impacted the bond sale. She said, however, Connecticut still sold its bonds at relatively low interest rates. “That said, the spreads on these bonds are somewhat higher than what we saw in March, which is attributable to a number of factors beyond the ratings action, including the Federal Reserve’s comments last week that interest rates are on track to increase this year,” Treasurer Nappier said.
The interest rates on this week’s sale were lower than in March due to lower overall interest rates. The interest rate on the 5-year maturity was 6 basis points lower than in March, and the rate for the 10-year maturity was 19 basis points lower. The total interest cost on the 11-year bond issue was 2.11 percent.
Connecticut typically issues bonds with 20-year maturities, with provisions that allow the state to pay them off after 10 years at no extra cost. Savings are achieved by refinancing bonds at lower interest rates — taking full advantage of the extended period of low interest rates experienced in recent years — as well as refinancing longer maturity bonds with shorter maturity, lower cost bonds.
Individual investors ordered more than $57.4 million of the bonds, primarily during a special one-day retail only order period on Monday, May 23. Bonds were offered to institutional investors on Tuesday, May 24, following an internet roadshow that was distributed electronically with the Preliminary Official Statement.