Unprecedented Low Rates Mark Two Treasury Borrowing Deals
Treasurer Steven Grossman and Secretary of Administration and Finance Jay Gonzalez today announced that two borrowing transactions conducted last week were done at unprecedented low interest rates, resulting in substantial savings to taxpayers in avoided interest costs. The deals involved a $400-million General Obligation bond sale with a total interest cost of 3.42 percent and a $1.2-billion short-term Revenue Anticipation Note sale at a borrowing cost of 9.8 basis points, or .098 percent.
“These kind of deals don't just happen. They are the result of strategic and transparent communications with the investor community and the kind of strong fiscal management that has earned Massachusetts its highest bond rating in history,” said Treasurer Grossman. “This laser-like focus on the bottom line will save taxpayers tens of millions of dollars over the course of these borrowings, and it reinforces Massachusetts’ reputation as a strong fiscal steward and a sound investment.”
“These historically low interest rates are a recognition by the bond market of the Patrick-Murray Administration’s management of the Commonwealth,” said Secretary Gonzalez. “We’ve both balanced the budget and made crucial investments in our future, which has led to a strong state economy and the highest bond ratings in the Commonwealth’s history.”
The two deals are the most highly competitive sales that Treasury has overseen in recent memory. Grossman and Gonzalez said that recent steps to enhance the Commonwealth’s financial disclosures to the investor community played a substantial role in reducing the cost of borrowing. Over the past year-and-a-half, state officials have taken steps to ramp up outreach to investors, such as hosting an Investor Conference last December to highlight the state’s competitiveness and offer presentations to potential investors.
The state also continues to benefit from its record-high bond rating, which was achieved last year when Standard & Poor’s raised the Commonwealth’s rating from AA to AA+, joining Fitch and Moody's at that level.
Bank of America Merrill Lynch won the competitive bid for the $400 million General Obligation bonds, while a series of investment banks including Morgan Stanley, J.P. Morgan, CitiBank, Jefferies, and Wells Fargo led the competitive bidding for the Revenue Anticipation Notes.