Friday, April 01, 2011

A Little More On Illinois Vs. Portugal

Bloomberg is reporting that Portugal had to pay 5.793% on average in their latest round of bond sales. Illinois bonds look to be yielding around 5.5%. To give a frame of reference, Portugese bonds are typically compared to 1-year German bonds which are now yielding 1.5%. Illinois bonds might be compared to US Treasury bonds which are yielding 0.3% for 1-year bonds. That means Portugal is paying a 4.3% premium over Germany and Illinois is paying a 5.2% premium over the Federal government.

Next time you want to sneer at the Euros and their ridiculous, bankrupt nanny states, consider our friends in the Land of Lincoln.

Update: A commenter pointed out that those were longer maturity Illinois bonds, so the comparison isn't quite fair.


Anonymous said...

Well, in the article they are comparing one year Portugal bonds to one year German bonds which is appropriate. But you are taking 20-30 year Illinois bonds and comparing them to one year US Treasuries, a huge mismatch. So, for instance on the final page of the prices for Illinois bonds which you link to you will see an Illinois bond that expires in 11/12 that yields around 1.5%.

K T Cat said...

Thanks! Update posted.