Commonwealth Sells Cash Flow Notes at Record Low Interest Rates
Average borrowing cost of 0.1% translates into hundreds of thousands of dollars in avoided interest costs for taxpayers
State Treasurer Steven Grossman announced today that the Commonwealth has successfully borrowed $1.2 billion in cash flow notes at record low interest rates. The Commonwealth borrowed by selling Revenue Anticipation Notes (or RANs) to ensure the state has sufficient liquidity over the course of the fiscal year. The average borrowing cost of 0.1% on the notes is the lowest cost of borrowing that the Commonwealth has ever recorded, and may represent one of the lowest borrowing costs for notes in the municipal market. Of the $1.2 billion in RANs, the Series A will be repaid in April 2012 and the Series B will be repaid in May 2012.
Seventeen bidders placed more than 40 different bids for the both the Series A and the Series B notes. The bid-to-cover ratio, which is a gauge of the demand for the notes, was more than 9.1 times for both series of notes.
"We are grateful for the solid bids we received today," said Treasurer Grossman. "This is a very strong signal from the market and from investors that the Commonwealth's credit is seen as one of the best in the market place. The recent bond and note pricings bear that out. There is no doubt that Massachusetts taxpayers are benefitting from the Commonwealth’s improved bond rating."
The record low borrowing rate translates into significant avoided interest costs for taxpayers. Total borrowing costs for the $1.2 billion is approximately $600,000.
Prior to the sale, the notes received the highest short-term ratings from Fitch Ratings, Moody's Investor Services, and Standard & Poor's.