For Immediate Release - September 19, 2013

Grossman Announces Record Low Short-Term Borrowing Rate

Commonwealth’s Strong Credit Rating Again Produces Substantial Savings for Taxpayers

          Treasurer Steven Grossman today announced that the Commonwealth’s strong credit rating has resulted in $6.7 million in savings to taxpayers, as Treasury was able to sell short-term borrowing notes at a new record low.  The $800 million borrowing was done at an interest cost averaging only 5.4 basis points, or .054 percent.  

          “Our solid fiscal discipline, enhanced transparency, and our highest-ever credit rating is saving taxpayers millions of dollars when we go to market with our bonds and notes,” said Grossman.  “The resounding success of this sale reinforces Massachusetts’ reputation as a strong fiscal steward and a sound investment.”

            The borrowing involved the sale of Revenue Anticipation Notes – or RANs – that are issued to cover short-term funding needs.  The RANs were sold in three different series, each with a different maturity date.  The $200 million Series A RANs are scheduled to be repaid in April 2014, the $300 million Series B RANs in May 2014, and the $300 million Series C RANs in June 2014.

            The last time Treasury sold RANs, it did so at an average interest cost of 9.7 basis points, at the time a new record low.  The 5.4 basis point interest cost from the sale announced today is 44 percent lower than that past record and will cost $6.7 million less than what was anticipated in the budget for fiscal year 2014.  Other states, such as Texas and California have recently sold RANs at a cost of over 20 basis points.

          Prior to the sale, the Commonwealth received short-term ratings of MIG1 from Moody’s; SP-1+ from Standard & Poor’s; and F1+ from Fitch.  The short-term ratings are based primarily on the projected cash flow and the availability of revenues to repay the notes, the long-term credit rating of the Commonwealth, and the financial management of the state.

          For the last four fiscal years, the Commonwealth had borrowed $1.2 billion annually in RANs for cash flow needs. The lower short-term borrowing need of $800 million is the result of a number of factors, including above-benchmark revenue collections.

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