California Pooled Revenue Bond Program
(Water and Wastewater Projects)
Summer Greetings to all!
As a past or interested Participant in the Water and Wastewater Financing Program, we would like to take this opportunity to briefly update you on the status of the Program and general market conditions.
Market Update
As you are aware, the Federal Reserve has signaled that it may need to raise its target rate for overnight loans between banks this year even as the economy slows because inflation is accelerating. Last week, policy makers kept the benchmark federal funds rate at 2%, ending the most aggressive easing monetary policy in two decades, and said in a statement that ‘the upside risks to inflation and inflation expectations have increased.’
The State of California, more that any other state, is reeling from the worst housing market in a generation and a slowing economy. Faster inflation, a falling dollar and a growing budget gap are causing investors to demand higher yields on everything from U.S. bonds to AAA corporate debt. However “AAA” tax-free California municipal bonds still have sufficient investor demand to sell at the following historically representative low interest rates.
------------------------------------------------------------------------------------ Insured “AAA” California Interest Rates (6/26/08)
20- year (2028) 4.80%
25- year (2033) 4.90%
30- year (2038) 5.00%
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Program Update
There is no doubt we are working in a totally different capital market. Even though credit is “crunched” and its availability is unlikely to improve anytime soon, the Program continues to enjoy Aaa/AAA/AAA ratings with FSA bond insurance (See chart below).
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